Monday, July 14th saw the first official meeting between representatives of the Commonwealth of Puerto Rico‘s Government Development Bank and a group of creditors. The meeting was attended by GDB President Melba Acosta and other senior officials, and Jim Millstein of Millstein & Co. as an advisor.
A report from BTIG highlights that during the meeting, GDB President Melba Acosta commented that it would be “premature” to provide details on how Puerto Rico proposed to restructure its debt, and that such details would eventually emerge as the island’s Economic Recovery and Fiscal Adjustment Plan is finalized.
More on Puerto Rico’s debt restructuring plans
When asked how Puerto Rico would fund itself for the rest of 2015 without the planned $2.95 billion Puerto Rico Infrastructure Financing Authority deal, Millstein said the Commonwealth had stated its liquidity would become very tight by the third quarter of 2015 “absent extraordinary measures”. He went on to say that these measures had already been undertaken, including issuing $400 million in tax and revenue anticipation notes to government entities and advances to the Treasury from the retirement system. Millstein called these steps stopgap measures.
Fielding a question about access to the capital markets over the long term if a debt restructuring of its general obligation and COFINA sales tax bonds occurred, Millstein admittted Puerto Rico required access to capital markets access. He went on to suggest that capital market access would eventually be restored given the implementation of a “credible plan.”
Millstein also said that the GDB was planning an “issuer by issuer approach” to debt restructuring, saying that the bank believed that the Puerto Rico Aqueduct and Sewer Authority would raise rates and thus capable of issuing new capital without any debt modifications.
When answering a query from AGO about whether Puerto Rico could pull off a turnaround without U.S. government involvement, Acosta noted that the Commonwealth has been in discussion with government agencies since 2013. Acosta made it clear Puerto Rico was not asking for a bailout, and she disagreed with those who say the request to Congress that the Commonwealth’s quasi-public entities be allowed to file for Chapter 9 bankruptcy protection is a “bailout,” given it was only asking for the same treatment as every other U.S. state.
Acosta commented that the U.S. could aid Puerto Rico without a bailout by rectifying the recent major cutbacks in the island’s Medicare and Medicaid funding. She also pointed out that the Jones Act, which requires that goods and passengers transported by water between U.S. ports be undertaken in U.S.-made ships, owned and crewed by U.S. citizens costs the island a great deal of money, and could be modified using a presidential “administrative order.”