Oversight board cannot yet provide timeline for restructuring talks
By The Star Staff
While the Financial Oversight and Management Board informed the U.S. District Court earlier this week that it has resumed discussions with the Puerto Rico government’s Fiscal Agency and Financial Advisory Authority regarding the terms of a plan of adjustment, it could not provide a timeline for the restructuring negotiations.
The oversight board said in a filing Tuesday that it anticipates that it will engage in discussions with creditors and other interested parties, with the guidance of the mediation team led by bankruptcy judge Barbara J. Houser, to address the implications of the COVID-19 pandemic on a plan of adjustment.
“Although the Oversight Board is not yet in a position to provide a timeline for these restructuring negotiations due to the continued uncertainty of the COVID-19 pandemic and the commonwealth economy, the Oversight Board expects to engage in productive discussions in the coming weeks,” the board said.
The oversight board is slated to file a status report by Sept. 9, including an update on the progress of the plan discussions and a proposal for the debtors’ plan and disclosure statement process, in accordance with the court’s scheduling order dated July 20.
The oversight board’s commonwealth plan of adjustment would restructure $35 billion of debt and other claims against the Commonwealth of Puerto Rico, the Public Buildings Authority, and the Employee Retirement System, and more than $50 billion in pension liabilities.
The plan provides a framework to reduce the Commonwealth of Puerto Rico’s $35 billion of total liabilities – bonds and other claims – by more than 60 percent, to $12 billion. Also pending is a restructuring support agreement for the Puerto Rico Electric Power Authority to overhaul some $9 billion in debt and one for the Puerto Rico Industrial Development Corp.
The oversight board said it continues to believe the primary focus of the government of Puerto Rico and the oversight board should be directed at protecting the health and welfare of the people of Puerto Rico from the novel coronavirus that causes the infectious disease COVID-19.
To that end, in recent months, the oversight board created the $787 million Emergency Measure Support Package, consisting of $500 million authorized as an incremental appropriation for the fiscal year (FY) 2020 General Fund budget, a $157 million reapportionment within the current FY 2020 Commonwealth General Fund budget, and $131 million in federal funds. The Emergency Measure Support Package is in addition to the $160 million for Puerto Rico’s Emergency Reserve Fund, which the board previously authorized.
“These emergency reserve financings were available because the Oversight Board has imposed and pursued sound budgeting practices and fiscal plans for the last three years,” the oversight board said. “The Oversight Board has worked closely with the Government to define how to spend this nearly $1 billion in emergency funding, with a clear focus on responding to and managing the ongoing pandemic.”
In addition to approving fiscal plans, the oversight board certified its own $22.2 billion FY 2021 budget for the commonwealth on June 30, as the island government did not approve and present a budget to the oversight board by the June 30 deadline. The budget contemplates $10.045 billion in spending from the General Fund, along with special revenue and federal funds being allocated.
Regarding the general status of relations among the oversight board and the commonwealth and federal governments, the board said that despite litigation the commonwealth has filed against the oversight board, “the relationship between the Oversight Board and the Government continues to be collaborative.”