SAN JUAN – The Puerto Rican government has proposed to holders of its tax-supported debt a restructuring plan that implies a 46 percent reduction in debt principle while creditors have the prospect of recouping that loss if the island’s economy prospers.
The plan, made public on Monday, proposes exchanging bonds valued at $49.2 billion for two others, one of them called “Base Bonds” with greater legal payment protection guarantees but whose principle would be set at $26.5 billion and the other called “Growth Bonds” valued at $22.7 billion.
Creditors would receive both a “Base Bond,” with a fixed rate of interest and amortization schedule, and a “Growth Bond,” which is payable if the Commonwealth’s revenues exceed certain levels.
Puerto Rican officials said the bond swap would give the government time to implement a five-year economic growth plan that would enable it to keep providing key services, pay back suppliers and taxpayers and create more liquidity.
“A crisis of this magnitude must be addressed in concert, otherwise we risk our ability and the opportunity to escape the spiral of a stagnating economy, endless deficits and increasing debt,” said Puerto Rican Secretary of State Victor Suarez.
The economic growth plan establishes measures to increase income by $20.6 billion over 10 years and reduce public spending by $13.8 billion during the same period, thus helping reduce the fiscal deficit over the coming decade by some $34 billion.
The government said that its aim is to ensure that the island’s debt is “sustainable” over the long term.