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Creditors Still Jockeying for Position Commonwealth Dealing With Counterproposal as Action on Capitol Hill Ramps up While action on Capitol Hill continues to pick up steam over Puerto Rico’s fiscal crisis, the Alejandro García Padilla administration is putting the final touches on a revised voluntary debt-restructuring proposal about to be presented to creditors.
some of the affected creditor groups under the government’s proposal, which covers roughly $49 billion of Puerto Rico debt, including general obligations (GOs) and the Sales Tax Financing Corp. (Cofina by its Spanish acronym). With each group fighting
‘Honey, We Shrunk the Middle Class’ Starring Puerto Rico’s Legislative Assembly
Did you love the 1980s? Well… if the answer is yes, go to your closet and dig up your LA Gear hi-tops and jogging suit and start getting in shape because that is where our economy is headed. But, if you think those years were not that hot…well, deal with it because Puerto Rico has returned to the 1980s and not even the much-maligned federal fiscal-control board will be able to send us forward to the 21st century. For the better part, if not for
all of the past decade (20062016), Puerto Rico has suffered the effects of the hardest and longest depression in its history. During the past 10 years, any economic advances Puerto Rico may have previously had were reversed or cancelled by a lessthan-zero growth rate of its gross national product (GNP), insufficient revenues, increasing public debt, new and higher taxes, increasing unemployment rate and the final phasing
out of Section 936 of the U.S. Internal Revenue Code, thus fiscally setting back the island not 10 or 20, but 30 years. “No one has received a more severe blow from this recession than the island’s middle class, which up to the turn of the century, used to be very strong,” said Eddy Sánchez, a planner working for the government on health-related issues.
GDB President Melba Acosta and Commonwealth Restructuring Adviser Jim Millstein But as one Puerto Rico bondholder adviser put it, there is perhaps a “perverse initiative to not reach a deal” with creditors at this moment—if the administration wants Congress to meet their demands. Any voluntary agreement at this stage would run counter to the government’s efforts on Capitol Hill, he added. For the past few weeks, advisers for all sides have been discussing the debt-restructuring offer the administration put forth last month. Counterproposals have been delivered by
tooth and nail to protect their respective claims, the commonwealth is reportedly looking to incorporate some of their feedback in the new proposal. Nevertheless, it is highly likely that reductions to principal across credits, or haircuts, and the priority list established under the government’s existing proposal—with GOs on top, followed by Cofina and so on with the rest of the affected credit claims—would remain.