Puerto Rico Exits Bankruptcy, But Work Remains

• Emergence from bankruptcy has been a long time coming for Puerto Rico, which has been in a bankruptcy-like process known as Title III since May 2017. On Tuesday, Puerto Rico’s government formally exited bankruptcy, completing the largest public debt restructuring in U.S. history, after announcing nearly seven years ago that it was unable to pay its more than $70Bn debt. 
• In January, the country was approved for a $135Bn debt adjustment plan. The financial transactions outlined in that plan included approximately $10Bn in settlements with creditors. That amount includes $7.2Bn for general obligation bondholders, $1.4Bn for public employees' retirement accounts, and $200Mn for general unsecured creditors, according to the board. 
• The adjustment plan reduces $33Bn in bond debt to $7Bn and cuts overall debt by around 75%. The plan also reduces the commonwealth’s annual debt service to around $1.5Bn from $3.9Bn previously. Notably, the adjustment plan also includes protections that limit how much debt Puerto Rico can undertake on in the future. 
• For Puerto Rico, remaining in bankruptcy has retarded the economy in multiple ways, as such, the country’s exit is a significant success. Nevertheless, the island is still trying to recover from the hurricane, a series of powerful earthquakes that struck its southern region starting in late 2019 and the ongoing coronavirus pandemic which has been a major setback. 
• Consequently, while many celebrated Puerto Rico’s exit from bankruptcy, it is unlikely the island will be able to access financial markets soon because it has yet to get its audited financial statements up to date.

(Source: Reuters & Daily Independent)