Puerto Rican government hopes to appease congress with new proposal on country's debt crisis

The restructuring debt program of Puerto Rico takes a new turn as the government devises a new plan to address the issue. The decreasing cash reserves of the country have been the main concern of the new proposal.

According to New York Times, the plan was announced as members  of the Washington Congress face a big decision on whether and how to give Puerto Rico extraordinary powers to pay off its debts. Government officials are now looking into the option of exchanging the country's debt against the $28 billion base bonds and another $2 billion tax-exempt capital appreciation bonds. Despite the disparity, this would still allow the government to provide services, pay local suppliers and vendors and also increase the liquidity and fund retirement system.

As reported by Bond Buyers, Puerto Rico has been constantly reaching for a consensual agreement with its creditors. Lawmakers in San Juan and Washington have also been carving out plans in addressing the country's $70 billion debt crisis.

Investors, on the other hand, have been proposing tougher terms. One of the groups that hold nearly $6.5 billion of general obligation bond offered to delay the $2 billion principal payment for the next five years to avoid a default in July. They also offered $750 million in liquidity through a different obligation bond sale. The government of Puerto Rico, however, rejected the proposal, fearing that it will lead to more debts and cash shortfalls as per KSL.

The new proposal that the Puerto Rican government is offering would reduce the debt service-to-revenue ratio on tax-supported debt from 35 percent to 15 percent. This plan was somehow questioned by the creditors, noting the validity of the statistics that the government has given.

Jacob Lew, the US Treasury Secretary, believe that the bill is not yet complete. He added that the issue of the bipartisan support has not been resolved. Lew said the issue should be resolved in the right way without supporting something that does not work.

Tags

Puerto Rico, financial crisis, Debt, government, proposal, United States

© 2023 Lawyer Herald All rights reserved. Do not reproduce without permission.