Puerto Rico Reach an Agreement with Bondholders to cut $24 billion of Debt

On Sunday, Puerto Rico Oversight, Management, and Economic Stability Act’s board (PROMESA) announced Puerto Rico had reached an agreement with bondholders whereby, the country will be trimming about $24 billion of debt in a move aimed at avoiding bankruptcy.

PROMESA is a United States federal law enacted in 2016 to establish an oversight board which will help the government of Puerto Rico in managing public finances, financial instruments and other financial related matters.

As per the agreement, $35 billion of bonds will be trimmed inclusive of claims totaling to about $11 billion.

About three years ago the country initiated a form of municipal bankruptcy with an aim of restructuring debts and liabilities amounting to about $120 million.

José Carrión, Chairman of the PROMESA’s board affirmed the recently closed deal will help the country escape bankruptcy.

“The deal lowers total debt payments relative to the agreement we reached last year, pays off commonwealth debt sooner, and has significantly more support from bondholders, further facilitating Puerto Rico’s exit from the bankruptcy that has stretched over three years,” said the chairman.

Nonetheless, the deal is facing opposition from Puerto Rico Governor Wanda Vazquez who says it does not address proposed pension cuts.

“My position during this process has been that if bondholders receive better treatment in a new deal, pensioners must also receive better treatment,” said the Governor.