Puerto Rico offered to pay 74 cents on the dollar to holders of its most secure bonds, or those guaranteed by the island’s constitution. Investors in less secure bonds would get between 57 cents and 36 cents.
That proposal covers about $49 billion of the island’s total $72 billion in debt, and is sweeter than an earlier plan that affected only $26 billion in debt. For comparison purposes, Argentina last month offered 75 cents on the dollar to bondholders of $4.65 billion in debt – and it was accepted, ending years of tension.
The clock is ticking as Puerto Rico owes two upcoming debt payments – $422 million on May 1 and $2 billion in July. Debt payments are soaking up nearly one-third of Puerto Rico’s operating funds, affecting public services.
The island’s debt crisis affects Florida, home to the largest concentration of Puerto Ricans in the states. The largest number lives right here in Central Florida, where thousands start over each year. (Puerto Rico has been in an economic recession for 10 years.) And it has spilled over to the presidential campaign, as candidates propose solutions to appeal to Puerto Rican voters.
In 2015 Puerto Rico defaulted on lesser amounts of debt, generating lawsuits. A new default would likely generate more court action.
Last month Congress proposed legislation to alleviate the island’s financial crisis, including creating a financial oversight board that many islanders consider a “takeover” and a violation of Puerto Rico’s limited self government. Puerto Rico wants some island agencies to be able to declare federal bankruptcy, a proposal rejected by Congress and major debtors who call it a “bailout.”
The U.S. Supreme Court will decide later this year whether Puerto Rico agencies can declare bankruptcy under local law.
˜˜Maria Padilla, Editor