This article, by William Selway and Alexander López, covers a new deal with major bondholders; if approved by other creditors, the financial oversight board and a U.S. court, investors would receive bonds issued by a new entity that would take over its assets, which are worth some $5.3 billion. It includes a Bloomberg video of an interview with Jim Millstein (CEO of Millstein & Co), who says that Title III was inevitable for Puerto Rico.
Puerto Rico said creditors of the insolvent government development bank agreed to accept losses by exchanging their bonds for new securities, moving the island another step toward escaping from some of its crushing debts.
Governor Ricardo Rossello said Monday that his administration struck a deal with major bondholders of the bank, which borrowed for the U.S. territory until the island’s fiscal crisis pushed it to default. If approved by other creditors, the financial oversight board and a U.S. court, the bank would be wound down and investors would receive bonds issued by a new entity that would take over its assets, which are worth some $5.3 billion.
Under the agreement, bondholders would exchange their debts at 55 percent, 60 percent or 75 percent of face value, depending on whether they elected to receive higher interest payments or the prospect of a greater recovery through debt with less legal claim to the bank’s cash, according to terms disclosed in a bond filing.
The deal comes less than two weeks after Puerto Rico initiated bankruptcy-like proceedings, giving it power to have debts dismissed in U.S. court if creditors don’t voluntarily agree to accept less than they’re owed. Puerto Rico has already reached a similar agreement with creditors of the government electric company and officials have said they intend to continue negotiating with investors who hold securities sold by other arms of the island’s government.
“This agreement is an example that the government is regaining the credibility it had lost over the past few years,” Rossello said. “We are satisfied with this agreement.” [. . .]