• The San Juan Daily Star

Lawmakers file enabling legislation for plan support agreement

Speaker of the Puerto Rico House of Representatives Rafael Hernández Montañez

By The Star Staff

House Speaker Rafael Hernández Montañez and a group of lawmakers on Monday introduced the legislation that would enable the plan support agreement that would restructure some $35 billion in commonwealth debt, which will be evaluated in public hearings.

House Bill 1003 – the Law to End the Bankruptcy of Puerto Rico – would allow a bond issuance of $7.4 billion in general obligation (GO) bonds. The restructured bonds would be exchanged for the current GO bonds in the market. The debt deal reduces the debt balance by 60%.

Also on Monday, U.S. District Court Judge Laura Taylor Swain agreed to a request to extend the voting deadline for the debt deal by 14 days, to and including Oct. 18, 2021, at 5 p.m. amid complaints that retirees had not received the voting packages. The judge also modified the Solicitation Procedures Order and the Confirmation Procedures Order to extend the filing of the Voting Tabulation Declaration by nine days, to and including Nov. 3, 2021. All other deadlines in the Solicitation Procedures Order and the Confirmation Procedures Order remain in full force and effect.

The bill, meanwhile, was introduced by Hernández Montañez with Popular Democratic Party representatives Jesús Santa Rodríguez Ángel Matos García, Luis Raúl Torres, José “Conny” Varela and Deborah Soto.

The move comes as the Financial Oversight and Management Board agreed to increase to $2,000 a month the threshold for making an 8.5% cut to retirees’ pension as part of the debt deal (see story on page 3). The legislation will create a mechanism that will reimburse retirees for any cuts made to their pensions if the government fiscal state allows for it. To do that, the House speaker said the government will need at least $90 million to reimburse the cuts.

Under the debt deal, Puerto Rico will pay $1.15 billion in debt service per year instead of $3.3 billion.

“Today the responsibility of the government of Puerto Rico is around $3.3 billion annually,” Hernández Montañez said. “Now two-thirds of that commitment is going to be reduced to an approximate amount of $1.1 billion.”

The legislation will create a contingent value instrument, or CVI, which would pay holders of the GO bonds and commonwealth-guarantee Public Building Authority bonds up to $3.5 billion more in debt service if sales and use tax collections outperform board projections.

“The government couldn’t see where the money was,” Hernández Montañez said. “So an instrument of contingent value is being created, which simply, to explain it in rice and beans, the only thing it does is collect all the collections that had been directed for the highways, for other [public] corporations … and redirects them to the central government and the central government will pay and fulfill their obligations with a budget allocation.”

He said Gov. Pedro Pierluisi Urrutia maintains his position of zero cuts to pensions.

“I will be against any cuts to pensions in the Adjustment Plan presented by the board to the federal court,” he said. “That will not change.”

“As I have said at all times, it is crucial that the debt is restructured because it is important that we get out of bankruptcy and my government will honor all pensions,” Pierluisi said.

The bill would also ensure there are economic funds for the municipalities to operate.

Hernández Montañez said a proposal was presented to the fiscal board so that 1.03% of the collections of the Municipal Revenue Collections Center (CRIM), which are destined for the payment of the service of central government debt, be reduced.

“If the central government reduced its debt to 60%, then the money that is committed from the CRIM is released, so that around $60 million would be available to distribute to the municipalities to finance the collection of garbage, the sanitary services, the collection of rubble, everything that has to do with recycling programs and thus finance one of the largest costs that all municipalities have,” the House speaker said.

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