A group holding more than $10 billion of Puerto Rican debt wants the island’s federally appointed financial oversight board to postpone a Wednesday deadline to approve a fiscal turnaround plan for Puerto Rico, saying the U.S. territory’s creditors should have input on the plan.
A bondholder group led by OppenheimerFunds and Franklin Advisers, which hold debt across a wide swath of Puerto Rican credits, made the request to the board in a letter made public on Monday morning, ahead of the board’s scheduled public meeting in New York.
“An extension would ... allow Puerto Rico and the oversight board to work with Puerto Rico’s key stakeholders to develop a fiscal plan that makes sense to all the parties,” the group said.
The turnaround plan, a requirement of the Puerto Rico rescue law known as PROMESA, must be submitted by Governor Ricardo Rossello and approved by the seven-member board in charge of managing the island’s finances. The plan is meant to serve as the basis for looming restructuring talks with holders of Puerto Rico’s $70 billion in debt.
So far, Rossello and the board have disagreed about what the blueprint should look like, with the board saying an initial draft by Rossello relied on overly optimistic revenue and growth projections. The draft increased 10-year cash flows by $33.8 billion, through spending cuts and new revenues, and contemplated $1.2 billion a year in debt service - only 30 percent of what it owes next fiscal year.
The board on Monday is expected to take up a revised version of the plan from Rossello, and has said it wants to approve a final version by Wednesday.
But the lingering disagreements between the board and Rossello call for an extension, the Oppenheimer group said in Monday’s letter, adding that more time might give the island’s creditors a seat at the table.
Oppenheimer said Rossello’s draft plan was unfeasible, saying it ignored payment priorities, offered too weak an analysis on debt sustainability, and did not go far enough on tax reform measures.
Puerto Rico is trying to stem rampant out-migration, reduce a 45 percent poverty rate, and fix near-insolvent public healthcare and pension systems.
Oppenheimer said it supported extending through Dec. 31 a stay on litigation arising from debt defaults, so sides can negotiate a debt restructuring without worrying about lawsuits.
(Reporting by Nick Brown in New YOrk; Editing by Peter Cooney)