Puerto Rico Recapitalization Agreement is a financial framework designed to address the debt crisis faced by Puerto Rico, a United States territory in the Caribbean. This agreement aims to restructure the outstanding debt of the territory and implement sustainable measures for its economic recovery. Under the Puerto Rico Recapitalization Agreement, the territory engages in negotiations with its creditors, including bondholders, to restructure its debt obligations. The negotiations involve discussions regarding the terms of the debt, such as the repayment schedule, interest rates, and potential debt forgiveness or reduction. The goal is to create a manageable repayment plan that allows Puerto Rico to meet its financial obligations while also promoting economic growth. One type of Puerto Rico Recapitalization Agreement is the PROM ESA (Puerto Rico Oversight, Management, and Economic Stability Act) Title III process. PROM ESA was enacted in 2016 by the U.S. Congress to address the fiscal crisis in Puerto Rico. Under Title III, Puerto Rico can file for bankruptcy-like protection, allowing it to restructure its debt with the supervision of a federal oversight board. Another type of recapitalization agreement is the Puerto Rico Electric Power Authority (PREP) Restructuring Support Agreement (RSA). PREP, the island's primary electricity provider, entered into this agreement to address its significant debt burden. The RSA outlines a debt restructuring plan for PREP, including renegotiating existing debts, securing new financing, and implementing operational and governance improvements to ensure the long-term viability of the power authority. Overall, Puerto Rico Recapitalization Agreements serve as vehicles for restructuring the territory's debt, providing a lifeline to Puerto Rico's economy and financial stability. By negotiating with creditors and implementing sustainable measures, these agreements strive to support the island's path towards economic recovery and fiscal resilience.
Puerto Rico Recapitalization Agreement
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The Restructuring Support Agreement (RSA) was developed by the FOMB to provide a pathway out of bankruptcy for PREPA and to transform Puerto Rico's power sector. The RSA provides for a 32% cut in the debt owed by PREPA, resulting in annual savings of $375 million for Puerto Rico's ratepayers.
The debt restructuring process typically involves getting lenders to agree to reduce the interest rates on loans, extend the dates when the company's liabilities are due to be paid, or both. These steps improve the company's chances of paying back its obligations and staying in business.
On January 18, 2022, Judge Laura Taylor Swain of the U.S. District Court for the District of Puerto Rico confirmed the Plan of Adjustment for the Commonwealth of Puerto Rico to restructure $33 billion of liabilities against the Commonwealth of Puerto Rico, the Public Building Authority (PBA), and the Employee ...
The debt restructuring plan was approved by a federal judge in January. It reduces claims against Puerto Rico's government from $33 billion to just over $7.4 billion, with 7 cents of every taxpayer dollar going to debt service, compared with 25 cents previously.
On January 18, 2022, Judge Laura Taylor Swain of the U.S. District Court for the District of Puerto Rico confirmed the Plan of Adjustment for the Commonwealth of Puerto Rico to restructure $33 billion of liabilities against the Commonwealth of Puerto Rico, the Public Building Authority (PBA), and the Employee ...
?The FOMB's Plan of Adjustment is premised on extracting further rents from commercial and residential energy consumers ?that is, ordinary citizens? to satisfy the unsecured claims of PREPA's bondholder-creditors.
The board oversaw a bankruptcy process that culminated in March 2022, when a federal court confirmed a plan that reduced Puerto Rico's debt by 80%. Still, the work of putting the Commonwealth on a sustainable fiscal path remains incomplete.
In 2016, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), which created the Puerto Rico Financial Oversight and Management Board to restructure the Commonwealth's unsustainable burden of more than $72 billion in debt and more than $55 billion in unfunded pension liabilities.