Fiscal board, some creditors agree in principle to lower commonwealth’s debt

By The Star Staff

The Financial Oversight and Management Board for Puerto Rico announced Wednesday that it reached an agreement in principle with several creditor groups to lower Puerto Rico’s debt to sustainable levels after a successful mediation process, but nonetheless asked the U.S. District Court for an extension to submit the debt deal to the judge.

U.S. District Court Judge Laura Taylor Swain had ordered the oversight board to submit by Wednesday the debt adjustment plan or at least a term sheet. But the board sought an extension, arguing that it wanted to add more creditors to the debt deal.

“However, the Oversight Board believes that an extension of the deadlines set forth in the scheduling orders to March 8, 2021 to file the informative motion and a proposed plan of adjustment will allow the Mediation Team to schedule and conduct additional sessions with parties in interest, and the Oversight Board to further mediation discussions and increase the foundational support (across a broad spectrum of creditor claims) for a plan of adjustment,” the motion states.

David Skeel, the oversight board chairman, said in a statement that Puerto Rico needs to put the debt restructuring behind it as soon as reasonably possible with an agreement that will be sustainable for the commonwealth.

“What we achieved at this point is a realistic proposal that will open a path to recovery from bankruptcy, and we informed the U.S. District Court for the District of Puerto Rico of our agreement,” Skeel said. “It is our goal to file a consensual plan of adjustment for the Commonwealth of Puerto Rico that includes as many creditors as possible.”

The oversight board reached the agreement with creditors holding about $7 billion of general obligation and Public Building Authority (PBA) bonds. The board said it will make the terms of the agreement available in short order to allow other parties to join. The agreement in principle builds on the Plan Support Agreements already reached with the Retiree Committee and certain unions, the oversight board said.

“The Oversight Board continues its efforts to reach a consensual plan of adjustment with as many parties as possible, including the Creditors’ Committee, unions, Employee Retirement System (ERS) bondholders, and bond insurers,” the board said.

In February 2020, the oversight board filed a plan of adjustment to restructure some $35 billion of debt and other claims against the Commonwealth of Puerto Rico, PBA and ERS. In response to the coronavirus pandemic, the board asked the court to put that plan on hold so that the long-term effect of the pandemic on Puerto Rico could be assessed. The oversight board and the commonwealth’s creditors resumed their mediation last summer.

Later on Wednesday, Gov. Pedro Pierluisi Urrutia reacted to the agreement.

“This agreement will in principle be the basis for a future Plan Support Agreement and Plan Amended Adjustment,” the governor said in a press release. “The Board also asked the Title III Court for an extension to present the Amended Adjustment Plan that conforms to the agreement in principle that that entity has reached with a group of creditors.”

“Although the details of the agreement in principle cannot be disclosed, since the parties continue to be immersed in the mediation process, the Government understands that the economic terms of the agreement in principle reached by the Board and a group of creditors are feasible. However, the Board was informed that the Government of Puerto Rico will not support an Adjustment Plan that contains cuts or adjustments to our pensioners,” Pierluisi added. “In this sense, we urge the Board to present an Adjustment Plan that does not contain cuts to pensions and that only reflects the economic terms of the agreement in principle. In this way, we can move together to complete this restructuring process.

“The government will continue to actively participate in the mediation process in order to ensure the best interests of the people of Puerto Rico.”

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