(Adds detail from plan)
By Nick Brown
March 1 Puerto Rico's fiscal turnaround plan
shows about $1.2 billion a year available to service debt, 50
percent more than an earlier projection by the federally
appointed board overseeing the U.S. territory's finances.
The plan, which the island's government released on
Wednesday, is meant to serve as a blueprint for Puerto Rico's
ascent out of fiscal crisis and as the basis for upcoming
restructuring talks with holders of some $70 billion in debt.
The government is expecting higher baseline revenues and
lower expenses than the board's projection. However, it falls
short of some spending cuts recommended by the board, such as on
The plan cites the possibility of a debt restructuring that
could include new tradable securities or a structure that ties
creditor recoveries to economic growth.
The 10-year fiscal plan, which Governor Ricardo Rossello
delivered to the board late on Tuesday night, is a requirement
of federal Puerto Rico rescue legislation, known as PROMESA and
passed last year.
The island is trying to fend off economic catastrophe,
facing a 45 percent poverty rate and nearly insolvent public
pensions and healthcare systems.
The plan needs approval by the board, which is under no
obligation to rubber-stamp it and can develop its own plan. The
board has said it wants to approve a plan by March 15.
Rossello would save as much as $550 million on healthcare
and about $89 million in pension spending. While this is below
the board's targets, the governor has cited the need to protect
Puerto Rico's poorest residents.
The board had recommended $1 billion a year in spending cuts
to healthcare and $200 million to pensions.
Rossello's plan still manages to increase the projected
figure available for debt service, to $1.2 billion from the
board's figure of $800 million, by using a higher forecast for
baseline revenues and a lower one for expenses.
According to the plan, a debt restructuring could include
creating additional tradable securities or series of cash flow
notes. It could also rely on a structure that ties creditor
recoveries to economic growth on the island.
Citing internal data, the governor's plan said Puerto Rico's
COFINA bonds, which are backed by sales tax revenue, trade at
about 69 cents on the secondary market, while general obligation
bonds, guaranteed by the island's constitution, trade around 67
(Reporting by Nick Brown; Editing by Chizu Nomiyama and Lisa