Puerto Rico’s Debt Adjustment Plan: A Guide to the First Version

Puerto Rico has unveiled its first version of a debt adjustment plan, outlining a roadmap for the island’s financial recovery. The plan aims to restructure over $70 billion in debt and includes significant cuts to pensioners and payment plans on allegedly illegal debt.

Key Provisions

Reducing bond payments by 35% to 50%, depending on the type of bond
Freeing up around $1.4 billion annually for the island’s government to fund essential services
Allowing Puerto Rico to buy back bonds at discounted prices, sparking concerns among bond insurers

Background

The plan was reached after several extensions and negotiations between the Puerto Rican government and the Coalition, a group of creditors and investors. The agreement is expected to be implemented over the next 10 years, with regular review and adjustment periods.

Reactions from Stakeholders

While some see the plan as a step towards financial stability, others are concerned about the impact on pensioners and taxpayers. Puerto Rico’s Governor said in a statement: “We understand that this plan will require significant sacrifices from our citizens… However, we believe it is necessary to ensure the island’s long-term economic viability.”

Next Steps

The debt adjustment plan is expected to be put to vote by the Oversight Board, which was established as part of PROMESA, a federal law aimed at restructuring Puerto Rico’s debt.

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