Judge gives tentative approval to debt disclosure statement

By The Star Staff

The judge overseeing Puerto Rico’s bankruptcy process, Laura Taylor Swain, tentatively approved on Wednesday a disclosure statement for the commonwealth plan of adjustment conditioned on the completion of negotiations with two bond insurers and numerous other changes.

The debt disclosure statement explains in layman’s terms the debt adjustment plan that would restructure some $35 billion in central government debt.

Swain made her determination at the conclusion of the second day of the July omnibus hearing, analyzing the adequacy of the debt disclosure statement. Already, the Financial Oversight and Management Board has reached agreements with the Unsecured Creditors Committee.

Discussions on the adequacy of the disclosure statement will continue July 27.

Swain gave numerous instructions to the oversight board on Wednesday. She asked the board to explain to creditors the risk they face in the event the island Legislature does not pass legislation enabling the debt adjustment plan. The government and the Legislature are opposing the plan because it includes an 8.5% cut to government retirees’ pensions that are higher than $1,500 per month.

She also asked the oversight board if they had a Plan B and warned that she may reject the debt adjustment plan if an agreement on the pensions was not reached.

Nonetheless, Swain’s decision paves the way for Puerto Rico to have a debt adjustment plan for the central government to exit bankruptcy by late November or December. If there is no confirmation plan by late January, creditors may opt out of the plan.

Swain scheduled hearings to determine the reasonableness of the debt adjustment plan for Nov. 8, subject to change.

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