Type to search

General Biz News

Bonistas del Patio blasts GDB debt restructuring law

Jorge Irizarry, executive director of Backyard Bonholders Inc.

Jorge Irizarry, executive director of Backyard Bonholders Inc.

Bonistas del Patio Inc., which groups Puerto Rican bondholders holding about $15 billion in Commonwealth debt, called Gov. Alejandro García-Padilla’s decision to sign a law to restruction the Government Development Bank’s outstanding debt “irresponsible and illegal.”

The group also said that forgiving the GDB’s debt, which includes about $3.2 billion in revenue bonds and a loan portfolio of more than $9 million as of December 2015, is also an affront to the Puerto Rico Oversight, Management, and Economic Stability Act (PROMISE) that specifically says existing laws and debts to creditors must be respected.

“The governor knows and the government know that most of the GDB’s debt is in Puerto Rican hands,” said Jorge Irizarry, executive director of the organization. “The GDB borrowed that money from Puerto Ricans who loaned it in good faith by purchasing the bonds.”

“The GDB used it to grant loans that the government itself now condones, incurring in a blatant conflict of interest without taking into account the rights and livelihoods of creditors. The vast majority of individual bondholders are retired people who saved all their lives and who have no other income to live,”Irizarry said.

On Tuesday, Garcia-Padilla signed into law Puerto Rico House Bill 2962, which creates a legal mechanism to restructure part of the central government’s debt in the form of securities and other obligations payable to the GDB in Fiscal 2017.

The law eliminates about 40 percent of loans and notes certain government agencies owe the GDB that were allegedly granted despite having no source of repayment, and establishes a mechanism to restructure the remaining 60 percent of the bank’s debt.

“It is irresponsible that debts are forgiven while there are several lawsuits pending in court against the GDB for its contempt for the constitutional rights of the bondholders and for attempting to dismantle the bank to the detriment of Puerto Rican savers who are the biggest creditors,” said Irizarry.

“For the past two years the government has been saying it wants to reach an agreement with bondholders, but this is a totally unilateral determination. It is outrageous,” he added.

Bonistas del Patio members have been significantly affected by three defaults the government has incurred in since August 2015, when it did not pay Public Finance Corporation debt due at the time.

In January 2016, the commonwealth defaulted on Infrastructure Financing Authority bond debt, and again last month, when the GDB failed to pay $400 million in debt service due. It is estimated that more than $200 million of that total is in the hands of Puerto Rican individual creditors, the group said.

Author Details
Author Details
Business reporter with 30 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.
Tags:

Leave a Comment

Your email address will not be published. Required fields are marked *