The debt-restructuring plan, which goes into force on March 15, could be challenged in court, though Skeel expects the judge to uphold it.
According to the board, the agreement authorized by federal judge Laura Taylor Swain reduces Puerto Rico’s public debt by 80% and saves the island more than $50 billion in debt service payments since some creditors consented to steep reductions in payments. Board members highlighted that the plan cuts claims against the government from $33 billion to just over $7.4 billion, with debt servicing accounting for only 7 cents of every taxpayer dollar, compared to 25 cents previously.
The board’s executive director, Natalie Jaresko, stated, “This era of financial difficulty is coming to an end.” “We’ve done something that many people felt was impossible.”
The plan also avoids proposed pension changes, which sparked heated debates and a schism between the board, Puerto Rico’s legislature, and the island’s governor, who were all adamantly opposed.
Although the plan states that Puerto Rico has enough resources to pay its debt until 2034, critics have claimed that the government lacks the financial means to satisfy debt service payments and have warned of harsher austerity measures.
Those worries were dismissed by Jaresko, who stated that while budgets were cut, no layoffs or agencies were shut down.
What is the status of Puerto Rico bonds?
MIAMI, Florida — On Tuesday, a federal judge approved Puerto Rico’s exit from bankruptcy under the largest public-sector debt restructuring plan in US history, nearly five years after the financially beleaguered territory claimed it couldn’t pay its creditors.
Hurricanes Irma and Maria, a series of earthquakes, and the coronavirus epidemic have only exacerbated Puerto Rico’s economic woes since it declared bankruptcy.
The restructuring proposal will cut the government of Puerto Rico’s debt, which totals $33 billion, by nearly 80%, to $7.4 billion. In addition, the agreement will save the government approximately $50 billion in debt payments.
Puerto Rico will also begin repaying creditors, albeit at a reduced rate, something it has not done in years. In 2015, the government announced that it would be unable to repay its debts.
Is it true that Puerto Rico bonds pay interest?
Spain occupied Puerto Rico beginning in 1493, when Christopher Columbus arrived on the island. Puerto Rico was ceded to the United States after the end of the Spanish–American War in 1898. The US then refused to pay the colony’s creditors, claiming they were owed a dreadful amount.
Before 1898, the people of Puerto Rico had Spanish citizenship; after 1898, the people of Puerto Rico did not have either independent nor colonial citizenship. President William McKinley signed the Foraker Act in April 1900, allowing only the House of Representatives of Puerto Rico to be elected by popular vote. Puerto Rico was characterized as an unincorporated “territory appurtenant and belonging to the United States, but not a part of the United States under the revenue clauses of the Constitution” in the Insular Cases, a series of Supreme Court decisions from the early 1900s.
Although legally defined as a commonwealth or protectorate, Juan R. Torruella considered Puerto Rico’s relationship with the United States to be colonial because the US Federal Government has ultimate economic and political decision-making authority and Puerto Rican citizens do not have full constitutional rights. Puerto Rico is subject to US legislation due to its political position. One of these laws is the Jones-Shafroth Act, which exempts interest payments from bonds issued by the government of Puerto Rico and its subdivisions from federal, state, and municipal income taxes (the so-called “triple tax exemption”), regardless of the bondholder’s location. Puerto Rican bonds were appealing to municipal bond investors because of this right. Because of this, Puerto Rico was able to issue bonds that were always attractive to municipal investors, regardless of the state of the island’s finances. As a result, Puerto Rico began issuing debt to cover its expenses, a practice that it has continued since 1973. The island also started issuing debt to pay off earlier debt, as well as refinancing older debt with low interest rates with debt with higher interest rates.
Puerto Rico was officially prohibited from declaring bankruptcy under Chapter 9 of Title 11 of the United States Code by Congress in 1984. Congress withdrew the tax credits between 1996 and 2006, resulting in the loss of 80,000 employment on the island and caused its population to drop and economy to contract in all but one year since the Great Recession began. Because Puerto Rico’s constitution stipulates that “all available resources” must first be used to pay the Commonwealth’s general obligation bonds, the Commonwealth began issuing Puerto Rico Sales Tax Revenue Bonds in 2006 to circumvent the constitution’s restrictions by being paid directly into a separate urgent interest fund. The sales tax has been raised to 11%. In 1958, the last property tax assessment was completed. Between February 4 and 11, 2014, three bond credit rating agencies downgraded Puerto Rico’s bonds to non-investment grade (commonly known as “junk status” or speculative-grade) when the island’s outstanding debt reached $71 billion, roughly equal to 68 percent of GDP. Bond acceleration clauses were activated as a result of the downgrading, requiring Puerto Rico to repay some debt instruments in months rather than years. Investors were fearful that Puerto Rico might default on its debt at some point. Puerto Rico’s ability to issue bonds in the future would be harmed if it defaulted. Puerto Rico now claims that it will be unable to maintain current operations unless dramatic actions are taken, which could result in public upheaval. Protests against the austerity measures have already taken place. Puerto Rico’s present debt problem is the result of these events, as well as a succession of governmental financial deficits and a recession.
How much debt does Puerto Rico have?
SAN JUAN, PRINCIPALITY OF PUERTO RICO — Puerto Rico’s nearly five-year bankruptcy struggle has come to an end as a federal judge signed a deal on Tuesday that reduces the US territory’s public debt load as part of a restructuring and allows the government to begin repaying creditors.
The deal, which is the largest municipal debt restructuring in US history, was authorized after arduous bargaining, contentious hearings, and numerous delays while the island recovers from fatal hurricanes, earthquakes, and a pandemic that exacerbated its economic plight.
“There has never been a public restructuring like this anyplace in America or the world,” David Skeel, chairman of a federal control board formed to monitor Puerto Rico’s finances, said of the plan.
He pointed out that there are no bankruptcy provisions for countries or US states like the one handed to Puerto Rico.
“This was an astoundingly difficult, huge, and important bankruptcy,” Skeel said, noting that the island’s debt was three times that of Detroit.
The government of Puerto Rico claimed in 2015 that it could not afford to pay its $70 billion public debt, which had accrued over decades of mismanagement, corruption, and excessive borrowing. In addition, it owed more than $50 billion in public pension obligations. A year after the United States Congress established the financial monitoring and management board for Puerto Rico, it filed for the largest municipal bankruptcy in US history in 2017.
Why is PR owing money?
After decades of mismanagement, corruption, and excessive borrowing to balance budgets, Puerto Rico accrued the debt. In 2015, a former governor deemed it unpayable, and the government filed for the largest municipal bankruptcy in US history two years later.
What is the state of Puerto Rico’s economy?
The World Bank classifies Puerto Rico’s economy as a high-income country, while the World Economic Forum ranks it as Latin America’s most competitive economy. Manufacturing, particularly pharmaceuticals, textiles, petrochemicals, and electronics, are the main drivers of Puerto Rico’s economy, followed by the service industry, particularly finance, insurance, real estate, and tourism. Puerto Rico’s geography and political status are both determining factors in its economic prosperity, owing to its small size as an island; its lack of natural resources used to produce raw materials, and thus its reliance on imports; and its relationship with the US federal government, which controls its foreign policies while imposing trade restrictions, particularly in the shipping industry.
On a macroeconomic level, Puerto Rico has been in a state of economic depression for 16 years, beginning in 2006 after a series of negative cash flows and the expiration of the US Internal Revenue Code’s section 936, which applied to Puerto Rico. This section was critical for the island’s economy because it established tax exemptions for U.S. corporations that settled in Puerto Rico and allowed its subsidiaries operating on the island to send earnings to the parent corporation at any time without having to pay federal tax on corporate income. Puerto Rico, on the other hand, has remarkably managed to keep inflation low during the last decade. Academically, the majority of Puerto Rico’s economic woes stem from federal regulations that have expired, been repealed, or no longer apply to the island; its inability to become self-sufficient and self-sustaining throughout history; its highly politicized public policy, which tends to change whenever a political party gains power; and its highly inefficient local government, which has amassed a public debt equal to 66 percent of its gross domestic product.
Puerto Rico has a lower poverty rate than the poorest state in the US, with 45 percent of the population living below the poverty line. When compared to the rest of Latin America, Puerto Rico has the highest GDP per capita. The Commonwealth has a tremendous bond debt that it can’t service, totaling $70 billion in early 2017, or $12,000 per capita, at a time when its unemployment rate (8.0 percent in October 2018) is more than double that of the mainland. During a decade-long recession, the debt had been rising. To avoid a bankruptcy-like procedure under PROMESA, Puerto Rico must establish restructuring agreements with creditors. More specifically, since 2016, Puerto Rico has been in an unusual situation: its economy has been overseen by a federal board that is handling finances and assisting in regaining access to capital markets.
The commonwealth has a modern infrastructure, a significant public sector, and an institutional framework governed by the regulations of US federal agencies, the majority of which are present and operating on the island. The United States, Ireland, and Japan are its key commercial partners, with the majority of its products coming from East Asia, primarily China, Hong Kong, and Taiwan. In 2016, new trading partners were added, with import trade with Puerto Rico beginning in Singapore, Switzerland, and South Korea. Puerto Rico’s global reliance on oil for transportation and electrical generation, as well as its reliance on food imports and raw materials, renders the island fragile and highly reactive to global economic and climate changes.
Are ZIP codes used in Puerto Rico?
If you’re looking for Puerto Rico zip codes and area codes, you’ve come to the right place. We’ve put up an easy-to-understand guide with statistics, an image map, and a sortable/searchable table containing all of Puerto Rico’s zip codes and area codes.
“What is the zip code for Puerto Rico…the area code?” is a frequently requested question. or “What is the San Juan, Puerto Rico zip code?” It’s not a simple answer, to be sure. In Puerto Rico’s 78 municipalities, which are similar to counties in the United States, there are currently 176 postal codes in use. Puerto Rico’s “Mainland” has 174 zip codes. The offshore islands of Vieques and Culebra each have their own zip code, bringing the total to 176. San Juan, Puerto Rico’s capital, is also a municipality with 36 postal codes on its own. The United States Postal Service (USPS) is in charge of mail delivery in Puerto Rico, just as it is in the United States. Standard, P.O. Box, and Unique (to an organization or firm) are among the USPS zip code classifications or “Types” that appear in the table below.
Puerto Rico’s major phone and mobile/cellphone area codes are 787 and 939, respectively.
939 was added primarily to accommodate the influx of new mobile phone users.
The country code, like that of the United States, is “+1” (i.e. 1+787+###+####).
Calling Puerto Rico from within the United States is the same as calling out-of-state (same as calling California from New York).
Below is an interactive chart that we created to help you look for zip codes and/or area codes for cities, towns, municipalities, and other places in Puerto Rico (or vice versa).
To get the information you need, either (1) type a location, zip code, or other criteria into the “Search:” box at the top right of the table below, or (2) sort any column by simply clicking on the column heading.
The table displays 25 rows of data “entries” per page by default.
You can adjust this setting at the upper left of the table to show more or fewer rows if needed.
When did the bonds of Puerto Rico default?
Puerto Rico first defaulted on its general obligation bonds in July 2016, when it failed to pay creditors about $1 billion, and it hasn’t made any payments since.
“It is a very positive development for Puerto Rico that a cross section of large bondholders has worked with the Oversight Board to develop a consensual restructuring agreement that will expedite the Commonwealth’s exit from bankruptcy, respect the lawful priority of valid public debt, and help restore capital markets access,” said Susheel Kirpalani, an attorney from Quinn Emanuel Urquhart & Sullivan who represents bondholders in the Lawful Constitutional Deficit Resolution.
According to public disclosures, hedge funds GoldenTree Asset Management, Monarch Alternative Capital, Whitebox Advisors, and Taconic Capital possess nearly $1.4 billion in constitutionally backed debt.
According to a person familiar with the settlement agreement, the proposal, which took about three months to negotiate, is expected to be lodged with the court within 30 days, with bondholders anticipating final approval by early 2020.
The Puerto Rican government issued a statement rejecting the agreement, citing the administration’s strong opposition to pension changes, which are included in the updated budgetary plan on which the restructuring agreement is based.
In a statement, Christian Sobrino Vega, the CEO and president of the Puerto Rico Fiscal Agency and Financial Advisory Authority, said, “Not one word of the PSA (Plan Support Agreement) is considered acceptable to AAFAF.” The Spanish acronym for the agency’s name is AAFAF.
“And we can firmly state that no legislation, executive action, or other administrative approval required from the Puerto Rico government will be taken to implement an agreement that directly or indirectly supports a Plan of Adjustment that decreases payments to our retirees,” Sobrino Vega said.
After being appointed in 2017 to monitor the $73 billion reorganization, which is the largest in the history of the US municipal bond market, the island’s oversight board has made some progress in 2019.
U.S. District Judge Laura Taylor Swain, who is supervising the unprecedented bankruptcy-like proceedings, authorized a plan in February to restructure approximately $17 billion in sales tax-backed bonds, dubbed COFINA for its Spanish name. Senior bondholders received 93 percent of their money back, while junior bondholders received 53 percent.
In addition, the court granted a debt restructure for the Government Development Bank worth roughly $4 billion.
A tentative arrangement for around $8 billion in debt issued by the island’s troubled electric power authority has also been reached. The monitoring board also announced a tentative agreement on Wednesday to restructure more than $50 billion in unfunded pension liabilities.
Is it true that Puerto Rico has voted for independence?
The Puerto Rican independence movement refers to efforts by residents throughout the island’s history to gain full political independence, first from the Spanish Empire from 1493 to 1898, and then from the United States since 1898. Over the years, a number of groups, movements, political parties, and organizations have fought for Puerto Rico’s independence.
On the island, there are a variety of pro-autonomy, pro-nationalism, and pro-independence views and political groups. Organizations fighting for independence in Puerto Rico have tried both peaceful political measures and violent revolutionary activities to attain their goals since the early nineteenth century. The independence movement has not received widespread support from the Puerto Rican public since the second half of the twentieth century, failing to gain traction in both plebiscites and elections. In a 2012 referendum on the status of the country, 5.5 percent voted for independence, while 61.1 percent opted for statehood. In the status referendums in 1967, 1993, and 1998, independence garnered the least support, with less than 4.5 percent of the vote.
In 2012, a fourth referendum was held, with 54 percent of voters choosing to change Puerto Rico’s status, but the federal government did nothing. On June 11, 2017, the fifth plebiscite was held. It had the lowest voter turnout of any status referendum held in Puerto Rico, with only 23% of eligible voters voting. In the referendum, the option of independence won only 1.5 percent of the vote.
The Puerto Rican Independence Party won 13.6 percent of the vote in the 2020 general election, a considerable gain in support from the 2016 general election, when it received only 2.1 percent of the vote. In the 2020 elections, the anti-colonial Movimiento Victoria Ciudadana received an additional 14 percent of the vote.
Who owns Puerto Rico’s power company?
Luma’s hire last year signaled the start of a 16-year, $1.5 billion privatization experiment for the island. Luma, a joint venture between two energy corporations — ATCO of Alberta, Canada, and Quanta Services of Houston — was hired to distribute electricity to 1.5 million users and improve the power grid. For the effort, the Federal Emergency Management Agency has set aside roughly $10 billion in taxpayer dollars. The state-run utility company, Puerto Rico Electric Power Authority (PREPA), now only oversees energy generation.