More Puerto Rico Agencies Enter Bankruptcy
May 22 2017 - 11:08AM
Dow Jones News
By Andrew Scurria
The federal board overseeing Puerto Rico's financial
rehabilitation is enlarging the U.S. territory's court-supervised
bankruptcy, placing its nearly depleted pension system and its
transportation agency under court protection.
The Employees Retirement System, known as ERS, and the Highways
and Transportation Authority, known as HTA, entered a
debt-restructuring process that amounts to municipal bankruptcy
Monday in the federal court in San Juan.
Those two systems are now under a federal debt-adjustment law
known as Title III alongside the Puerto Rico government and its
sales-tax bond issuer, known as Cofina. U.S. District Judge Laura
Swain Taylor, who is presiding over the cases, held the first court
hearing on the government's case last week.
"This is part of a court-supervised process within a framework
that provides for an orderly restructuring of the debt of each
entity and allows as much creditor consensus as possible," said a
spokesman for Puerto Rico's fiscal agency.
The pension system's bankruptcy has implications for hundreds of
thousands of government retirees and pensioners who are up against
bondholders in the renegotiation of Puerto Rico's debts. So far,
the oversight board has signaled it wanted more of the
restructuring burden to fall on financial creditors compared with
retirees, proposing a 10% cut in pension benefits while allocating
less than a quarter of the debt service owed for the next 10
years.
Estimates vary as to the size of the gap between what the
pension fund's assets and its promises to its beneficiaries, but
Puerto Rico projects the unfunded liability at roughly $45 billion,
the product of years of deficient funding by government employers.
ERS also owes $3 billion to bondholders. The highway agency owes
roughly $6.3 billion in debt, including $1.8 billion to Puerto
Rico's insolvent industrial development bank, according to the
oversight board.
Puerto Rico and its agencies owe roughly $73 billion in bond
debt, dwarfing the roughly $9 billion owed by the city of Detroit
when it entered what was previously the largest municipal
bankruptcy in 2013.
The bankruptcy proceedings are the culmination of years of
economic distress and heavy borrowing that has more recently pitted
Wall Street creditors against local officials struggling for fiscal
flexibility. Creditors are also battling each other for top
priority.
Write to Andrew Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
May 22, 2017 10:53 ET (14:53 GMT)
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