The Oversight Board has until July 15 to explain to Judge Laura Taylor Swain what will happen with the Plan Support Agreement (PSA) between Puerto Rico and the Lawful Constitutional Debt Coalition (LCDC) and other creditors and, therefore, with the plan the entity proposed to renegotiate some $18.757 billion in constitutional debt.
Yesterday, during the Title III cases general hearing, the Board said it is working with the Puerto Rico government to address the short and long term effects of the COVID-19 pandemic and determine “the ramifications” of the health crisis on the adjustment plan filed last February.
During the hearing, held again over the phone because of the pandemic, Board attorneys and partners of Proskauer Rose, Martin Bienenstock, and Brian S. Rosen told Swain that the Board does not intend to end the PSA, but to work on the agreement.
Rosen said that “no one had decided” to terminate the deal that would pay off creditors about 72 percent of what they lent to the government. Although he did not detail which ones, the lawyer indicated that there are still certain “milestones” in the PSA that have not been achieved and that, therefore, talks would continue under the mediation process the parties have followed.
This way and although last week the Board indicated the public debt “is not payable” as agreed, the entity would have left the terms of the agreement intact, which includes paying millions of dollars in accumulated interest during the bankruptcy process which has been increasing since March 1. And this although the government continues to face challenges in managing the coronavirus pandemic and has been slow – according to the Board – in using the approved emergency funds.
The PSA remains in place while estimates point that fiscal revenues have plummeted by at least $1.8 billion due to the COVID-19. The figure was reiterated yesterday in the report the Fiscal Agency & Financial Advisory Authority (FAFAA) filed and that Judge Swain received.
While the Board would not have taken a formal position on the PSA, the entity certified last week a new fiscal plan that reduced by two thirds the surplus that would be available to creditors.
According to sources, the PSA will have to be substantially modified, which has already been anticipated, considering the price of Puerto Rico’s bonds in the secondary market.
So farthis year, the Puerto Rico Municipal Bond Index (SAPI PR) has fallen just 1 percent, however after reaching up to 76 cents last February, GOs issued in 2014 were yesterday at about 60 cents, according to data from the Municipal Securities Regulatory Board.