Puerto Rico Governor Rejects Bankruptcy Deal

On Sunday, Puerto Rico Governor Wanda Vázquez rejected a settlement that would reduce PR’s public debt by 70%.

• Vázquez said the deal didn’t do enough to protect the island’s retirees.

The backstory: Puerto Rico is in the throes of a financial crisis that's stretched for almost four years. In 2015, the U.S. territory announced it would default on its more than $70 billion in public debt. In May 2017, it filed for the largest municipal bankruptcy in U.S. history.

A federal control board monitors Puerto Rico’s debt and is working toward economic recovery. First step: settle with bondholders like Aurelius Capital Management and Autonomy Capital. The board proposed a settlement last June that would force a 60%-plus loss on some bondholders. This one would cut that loss to 30% for all bondholders and force Puerto Rico to square up in 20 years.

• Board Chairman José Carrión said the agreement “lowers total debt payments relative to the agreement we reached last year, pays off debt sooner, and has significantly more support from bondholders.”

But others in Puerto Rico, including Gov. Vázquez, are worried about what a deal would mean for social services. Puerto Rico is still reeling from 2017’s Hurricane Maria and a more recent spate of earthquakes, including one that reached 6.4 in magnitude.

Looking ahead...the deal still needs approval from U.S. District Court Judge Laura Taylor Swain.