Puerto Rico’s Record Bankruptcy Ending After Debt Plan Nod by Federal Judge

• After more than four years of negotiating with bondholders on how to reduce its debt load, Puerto Rico’s record municipal bankruptcy is coming to an end. 
• The federal judge overseeing the bankruptcy case on Tuesday approved a debt restructuring plan that’s seen as the last major hurdle in order to exit court protection. It shrinks $22 billion of bonds down to $7.4 billion and established a reserve trust to fund the island’s broke pension system. 
• While the bankruptcy process cut Puerto Rico’s annual bond payments down to $1.15 billion, it’s not a cure for its underlying issues, including a shrinking population and weak infrastructure. And the government still needs to come up with $3.4 billion a year to cover all its debt and pension benefits costs. 
• However, exiting bankruptcy will allow the island to move beyond default, begin repaying bondholders and creditors, focus on growing its economy and rehabilitate a weak electrical grid that suffers from chronic outages. Additionally, the US commonwealth will need to restore bondholder confidence that the island can balance its budget without using borrowed money.

(Sources: Bloomberg & NCBCM Research)