Puerto Rico passes post-hurricane debt restructuring law

Puerto Rico governor Ricardo Rosselló Nevares signed into law an updated law to restructure the debt of state development bank Banco Gubermental de Fomento (BGF), taking one of the first major thrusts to repair the US territory's brittle fiscal situation following last September's catastrophic hurricanes.

"This agreement reaffirms our desire to reach agreements with our creditors. These amendments will simplify the bank's debt management processes and provide relief of US$300mn for municipalities. Likewise, the municipalities will see debts canceled with the deposits they had in the BGF," said Rosselló Nevares in a statement.

Similarly, the governor noted that a law published in August before the storms created the legal framework to restructure the debt of the BGF. However, the effects of Hurricanes Irma and Maria made it necessary to return to the negotiating table, resulting in the latest initiative.

"The new agreement provides a significant financial relief to municipalities, as it is authorized to offset the deposits and loans of these with the BGF; resulting in a significant reduction of debts of municipalities with the BGF, providing a relief in cash flow, "said Rosselló Nevares.

The agreement allows the disbursement, before the closing date of the transaction for the restructuring of the BGF debt, 55% of the excess of the special additional tax (the Excess CAE) to those municipalities that have Excess CAE in the BGF that has not yet been disbursed. Thus, said municipalities will not have to wait until the closing date of the transaction to obtain said funds.

BGF president Christian Sobrino Vega said in the statement, "This piece of legislation introduces the necessary amendments to allow the implementation of the new agreement for the restructuring of the BGF debt. With the signing of this law we put an end to the restructuring of the BGF debt, in a manner satisfactory to all parties."