Government Development Bank President Melba Acosta said Tuesday the administration “has faith” it will pull Puerto Rico out of the fiscal abyss it is currently in, and will set up mechanism to avoid a repeat of the island’s current $73 billion debt scenario.
“We have to see what we can do so that Puerto Rico does not again create diverse credit mechanisms like it has now,” said Acosta, during a panel discussion on restructuring Puerto Rico’s public debt sponsored by the Puerto Rico Chamber of Commerce.
Puerto Rico has 17 credit-issuing entities, all of which have borrowed through bonds over decades, offering different payment terms and different conditions to investors. The Commonwealth guarantees certain bonds, such as the General Obligation and the Sales Tax Financing Corp. (known as COFINA) while others — such as debt issued by the Puerto Rico Electric Power Authority and the Puerto Rico Aqueduct and Sewer Authority — are guaranteed by their own revenue sources.
“Nobody understands Puerto Rico’s debt and part of the restructuring will focus on simplifying that,” she said. “One of the questions I’ve asked our consultants is what can we do to guarantee that after we go through all of this process, that scenario doesn’t repeat. There are ways, and the legislature is key in all of this.”
During her participation in the panel discussion that also included Sen. Angel Rosa, Stone Lion Executive Julio Cabral and CPA Kermit Lucena, Acosta — who is heading the government’s restructuring process — Acosta said the idea is to negotiate a “comprehensive solution” to the island’s unsustainable indebtedness level.
During his turn, Rosa said there was “a lot of creativity” when the financing instruments were being created, “as there was also a voracious appetite for consuming them, because Puerto Rico offered extraordinary fiscal advantages.”
The triple-tax exemption was their strongest draw, he said.
The government is expected to start meeting with creditors next week in New York, to discuss the fiscal conditions of each of the credit-issuing entities, Acosta confirmed.
Ahead of the talks, the government has required creditors to sign non-disclosure agreements, which restrict them from divulging the contents of so-called “data rooms” that the GDB has set up to share the information to be discussed next week.
During his turn, Cabral argued the information in those data rooms should be public, to guarantee fairness in the process.
“I believe the debt has to be restructured, but you can do it a thousand different ways — through public-private partnerships, amortizations, extending maturities, all of those things that I think could be worked out,” he said. “The discussion should be public, seeking what’s best for all parties.”