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  #81  
Old 11-08-2016, 10:42 AM
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http://www.investmentnews.com/articl...rto-rico-claim

Quote:
UBS to pay close to $1 million in another Puerto Rico claim
The wirehouse is facing a raft of customer complaints tied to its sales of the commonwealth's municipal bond funds

UBS Financial Services Inc. has been ordered to pay an arbitration award of close to $1 million to an investor who sued the firm over losses stemming from investments in UBS Puerto Rico closed-end bond funds.

The three-person arbitration panel at the Financial Industry Regulatory Authority Inc.'s Office of Dispute Resolution awarded the investor, Ana Elisa Ciordia-Robles, $751,000 in compensatory damages, plus interest, and $206,000 in attorneys' fees and costs, according to the arbitration award announced on Friday.

Ms. Ciordia-Robles claimed breach of fiduciary duty, negligent supervision and other allegations in the matter, according to the award.

......
UBS Wealth Management Americas is facing a raft of customer complaints tied to its sales of Puerto Rico municipal bond funds. Last year, it agreed to pay a combined $34 million to settle allegations from U.S. regulators tied to its supervision of sales of the funds and a former broker's alleged fraud.

The payment was tied to charges from the Securities and Exchange Commission and the Finra. In both cases, the firm did not admit or deny charges. In 2014, UBS said claims tied to UBS Wealth Management Americas' Puerto Rico closed-end municipal bond funds have risen to nearly $1 billion.
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  #82  
Old 11-23-2016, 01:55 PM
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http://www.thefiscaltimes.com/2016/1...Get-Even-Worse

Quote:
Why Puerto Rico’s Debt Crisis Could Get Even Worse

Toa Baja, a mid-sized city in Puerto Rico, shut down last Monday after failing to pay municipal employees for several weeks. All public services have been suspended indefinitely. Could this be the future for other cities across Puerto Rico and on the U.S. mainland?

Toa Baja, with a population of about 80,000 people, reported more than $175 million in long-term debt in its fiscal year 2015 financial statements. This excludes $5.7 million in “Matured Bonds,” which were evidently in default. Meanwhile, the city’s general fund — essentially its checking account — ended the fiscal year with a negative balance of $14 million.

The shutdown is not a surprise for many of us in Puerto Rico, as Toa Baja’s finances have been deteriorating for some time. Unfortunately for Puerto Rico, there are the many other cases like that of Toa Baja going unnoticed.

Let’s begin with Ponce, the Island’s fourth largest city. According a financial index constructed by our Center for Integrity in Public Policy (CIPP), Ponce has consistently among the most financially distressed municipalities since 2010. The city has over $324 million in long-term debt and a negative general fund balance of $38 million. One might think that a city like this would change its ways, but Ponce general fund expenditures in 2015 exceeded revenues by $14 million, representing a 15 percent budget deficit for the year. Sadly, the people of Ponce were not as proactive as the people of Toa Baja: The incumbent mayor, Mayita Melendez, was just reelected with 50 percent of the vote, almost the same percentage she received in 2012.

The town of Maunabo is another good example, as it also has one of worst fiscal scores on our index. Maunabo Mayor Jorge Luis Márquez has been at the helm since 2001 and was also reelected with 50 percent of the vote in this past election. Although Maunabo’s long-term debt of $18 million might not seem like much, it is substantial relative to its small population of 11,335 people.

This is part of the problem in Puerto Rico: There are 33 municipalities with a population of less than 30,000 people. One might ask how these small municipalities finance their operations given Puerto Rico’s ongoing recession. This is where the Commonwealth government has stepped in — providing 77 percent of Maunabo’s general fund revenue in 2015. The municipality spends most of this aid on payroll. This includes the mayor’s salary of $54,000 a year, a hefty number considering that the median household income in Maunabo is only $17,866.

.....
Municipal financial reform may not be possible within Puerto Rico’s political system. Mayors make change through the Puerto Rico Legislature very difficult. Recently, a lame duck legislator offered a bill to consolidate municipalities, but the bill did not even receive a public hearing. Although we are happy that Toa Baja got a new mayor, most cities in poor financial health were not as lucky.

Sadly, the new mayor in Toa Baja will probably not be able to save his city: It is too deeply in debt. Barring intervention from the new financial oversight board, it is likely that other cities in Puerto Rico will be closing their doors in the months and years ahead.

Arnaldo Cruz is co-founder of the Center for Integrity and Public Policy (CIPP), a think tank in Puerto Rico that recently published a Financial Health Index comparing Puerto Rico’s 78 municipalities.
Here is where that Financial Health Index is:
http://fiscal.cipp-pr.org/
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  #83  
Old 12-23-2016, 02:25 PM
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http://www.bloombergquint.com/onweb/...-to-68-billion

Quote:
Puerto Rico Ten-Year Deficit Forecast Raised to $68 Billion

(Bloomberg) -- Puerto Rico is facing a budget shortfall of $67.5 billion over the next decade, almost $10 billion more than previously projected by Governor Alejandro Garcia Padilla, underscoring the need for the island to cut its debts and turn around the faltering economy.
The forecast was released Tuesday by the U.S. board that was installed after the territory’s worsening fiscal crisis led it to default on a growing share of its $70 billion debt. The seven-member panel said it plans to restart negotiations with creditors this week, seeking to secure a voluntary agreement with bondholders instead of imposing losses on them in court.
"We are doing everything we can to be correct with the creditor community," Jose Carrion, the chair of the board, said during a press call on Tuesday. "We’re moving in that direction."

The board also said that the government needs to cut spending because the deficit is so large that even wiping out all of its debt -- an option that’s not legally available -- wouldn’t be enough to balance the budget.
“This reality requires the government of Puerto Rico to step up to the plate and propose the initiatives and measures necessary for Puerto Rico to meet the enormous fiscal challenge it faces,” José Ramón González, a member of the Financial Oversight and Management Board for Puerto Rico, said in a statement.

Puerto Rico is veering toward the largest restructuring ever in the U.S. municipal-bond market after borrowing for years to pay its bills as the economy contracted. Garcia Padilla, who will leave office next month, has been defaulting on bonds to avoid deep cuts to services on an island where nearly half of the 3.5 million residents live below the poverty line.
The resolution will now largely be up to the oversight board. Members plan to work with the Governor-elect Ricardo Rossello to approve a turnaround plan by the end of January.
The revised financial projections exclude additional health-care funding from Washington and don’t assume any revenue from an excise tax on multinational businesses that’s set to expire. The levy, which U.S. corporations can take as a credit on their federal income taxes, made up 28 percent of revenue in the first five months of the 2017 fiscal year, according to the island’s Treasury Department.

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  #84  
Old 12-23-2016, 02:25 PM
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http://floridapolitics.com/archives/...ecommendations

Quote:
Congressional Puerto Rico task force releases final recommendations


A bipartisan Congressional task force heavily influenced by Florida’s U.S. Sens. Bill Nelson and Marco Rubio released its final report Tuesday on dealing with Puerto Rico’s economic collapse offering scores of recommendations for helping the U.S. territory, its economy and it’s people.

Authorized last summer by the Puerto Rico Oversight, Management, and Economic Stability Act, or “PROMESA,” the task force has been working for six months to prepare a blueprint for the official federal agency created in that same law that will oversee the territory’s economic governance for the near future, the Puerto Rico Financial Oversight and Management Board.

Most of the recommendations could be passed by Congress and signed by the president, pushing reforms independent of the management board. Some are recommendations for the island’s commonwealth government to tackle. Others fall more in line with hopes for changes.

.....
The congressional report is 125 pages long.

Among the task force’s recommendations:

* Repeal an exemption in a 1940 law that otherwise provides some investment protection to companies.

* Congress needs to enact an equitable and sustainable legislative solution to the financing of Puerto Rico’s Medicaid program early in 2017.

* Changes also should be made to how Medicare is administered on the island, possibly changing the opt-in requirement for Puerto Ricans who want Medicare Part B.

* Congress should expand the federal child tax credit in Puerto Rico so families there with one or two children can claim it just as families in the states do.

* Congress also should consider other tax reforms to bring Puerto Rico’s tax laws more in line with the states.

* Increase the amount of excise tax on Puerto Rico and Virgin Islands rum, and imported rum, that is paid back to the island’s government.

* Congress should extend the tax deductions available in the states for qualified film, television, or live theatrical productions to Puerto Rico.

* The government of Puerto Rico should fully reform the Puerto Rico Electric Power Authority, which the task force said “does not inspire confidence” with its high-priced and unreliable electrical production and grid.

.....
* And, regarding future status – statehood, independence, continuance as a U.S. Territory, the Task Force simply stated Congress should take it seriously: “If the government of Puerto Rico conducts a plebiscite authorized and funded by Public Law 113-76, the Task Force recommends that Congress analyze the result of this plebiscite with care and seriousness of purpose, and take any appropriate legislative action,” the task force concluded.

http://www.finance.senate.gov/imo/me...l%20Report.pdf
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  #85  
Old 12-23-2016, 02:27 PM
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http://www.commondreams.org/newswire...-restructuring

Quote:
Puerto Rico Oversight Board Moves Forward on Debt Restructuring
WASHINGTON - Puerto Rico's "control" board sent a letter to current Governor Alejandro García Padilla and incoming Governor Ricardo Rossello stating areas for fiscal plan review and that debt restructuring talks are moving forward. The Financial Oversight and Management Board of Puerto Rico begins conversations with creditors this week.

"It's critical the board is moving forward with the process to restructure Puerto Rico's debt," said Jubilee USA Executive Director Eric LeCompte. LeCompte testified to the board in November and suggested the debt be reduced by as much as 60 percent. "I'm encouraged by statements from board members that a deep reduction of Puerto Rico's debt is needed."

The oversight board and debt restructuring process for the US territory are products of Congressional action this past summer. The Puerto Rico Oversight, Management and Economic Stability Act also temporarily prevents debt collection lawsuits against the heavily indebted island. Unless a formal debt restructuring process moves forward by February, the moratorium on lawsuits will expire.‎

"If talks between creditors and Puerto Rico fail to achieve a deep cut in the debt, the oversight board needs to authorize the formal court arbitrated restructuring process," noted LeCompte. "Solving this crisis starts with restructuring the debt. Creating economic conditions for growth depends on a deep cut of the island's debt."

Read the letter

Read Eric LeCompte's testimony to the Financial Oversight and Management Board of Puerto Rico in November

Read a timeline of Puerto Rico's debt crisis
Letter:
https://d3n8a8pro7vhmx.cloudfront.ne...pdf?1482340797

Quote:
NATURE AND MAGNITUDE OF PUERTO RICO’S CURRENT FISCAL AND
ECONOMIC PROBLEM
Puerto Rico has a massive fiscal deficit, a declining economy and no access to capital markets.
To understand the magnitude of this problem, the Oversight Board and its advisors have been
working diligently with the Government and its advisors to develop a “baseline gap” analysis
that answers the following question: “What would happen to Puerto Rico’s fiscal situation over
the next 10 years if all current obligations remain as they are and no corrective actions are
taken?”
To answer this question, we requested the current Administration to make certain modifications
to its models, including an economic forecast based on current law and policy, updated pension
assumptions, and spending projections that reflect existing obligations and current spending
levels. These changes, based on the latest information available as well as updates to other
assumptions, result in a fiscal gap of $67.5 billion over the next 10 years. The implications of
this situation are dire:
 The $67.5 billion projected budget gap is equivalent to approximately $54,000 per Puerto
Rican family, or 2.8 times the average Puerto Rico median annual family income. In
other words, unless action is taken, covering the enormous deficit would require the
equivalent of EVERY Puerto Rican family having to pay $5,400 EVERY year over the
next 10 years, for a total of $54,000 per family.
 The Government would have to reduce expenses, increase revenues or both to close an
average annual budget shortfall of $7 billion (out of about $20 billion in annual spending)
to meet its current legal obligations.
 Even if the Government made no debt payments (which is legally and equitably not an
option), Puerto Rico would face an average annual budget shortfall of more than $3.2
billion.
A decline in the gross national product (GNP), likely larger than what has occurred over
the past years, is expected.
 Puerto Rico has limited or no ability to finance such a deficit through additional
borrowing.
We will continue to evaluate the baseline numbers in the FEGP as part of the certification
process. Specifically, the Oversight Board is seeking an independent third party validation of the
starting point of the Baseline Projection and the bridge from the last available audited financial
statements of fiscal year 2014.
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  #86  
Old 12-29-2016, 12:35 PM
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https://www.bloomberg.com/news/artic..._medium=social

Quote:
Are U.S. Territories Now Junk? Puerto Rico Creates Ratings Rift

The U.S. effort to help pull Puerto Rico from a fiscal crisis has two major rating agencies at odds over another U.S. territory’s debt.

Fitch Ratings cut Guam’s business-tax revenue bonds to junk last week, arguing that Puerto Rico’s rescue law, known as Promesa, "fundamentally" alters the premise used to rate debt issued by territorial governments. Even though the act doesn’t apply to the Pacific island 9,300 miles (15,080 kilometers) from Puerto Rico, analysts say it has set a precedent that could let other territories escape from obligations to bondholders.
S&P Global Ratings disagrees. It holds an A rating on the securities, reflecting the island’s ability to pay investors.

Promesa "currently only applies to Puerto Rico. The idea that it already applies to Guam, in our view, is not correct," said Paul Dyson, an analyst with S&P. "We have no indication that Guam is going to do something similar to Promesa."

Unlike its Caribbean counterpart, Guam’s economic outlook is stable, according to S&P. The territory, home to American Air Force and Navy bases, stands to benefit from U.S. plans to expand its military operations on the island, which is the closest U.S. territory to potential hot spots in Asia. Representatives for Donald Trump’s transition team did not respond to requests for comment on whether the president-elect will reconsider the military buildup on the island.

Guam, however, shares some of Puerto Rico’s fiscal challenges, such as unbalanced budgets, rising pension liabilities and swelling debt. It has $3.2 billion in obligations and a population of about 165,700, according to data compiled by Bloomberg.

The possibility that other territories will be given legal recourse to cut their debts -- an idea that Guam officials have repeatedly rejected -- has prompted some investors to reduce their positions. Daniel Solender, head of municipals at Lord Abbett & Co., which manages $20 billion of state and local securities, said he’s sold some of the island’s debt after Promesa was enacted on June 30 and doesn’t own any of its business-tax bonds, in part because of Promesa.

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Old 02-27-2017, 06:40 AM
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http://www.bondbuyer.com/news/region..._medium=social

Quote:
Rosselló Says Oversight Board's Austerity Risks Breaking the Law
Puerto Rico Gov. Ricardo Rosselló suggested Tuesday that the federal Oversight Board's plans for austerity may be against federal law.

In a statement sent from the governor's office, Rosselló's chief of staff William Villafañe said that "The Fiscal Supervision Board officials cannot act outside of the law that created the body. If the board were to force the implementation of a fiscal plan that affects people's essential services, it would be acting contrary to the PROMESA law."

The complaints mark an escalation of tensions between the island government and the federal board appointed last year to oversee fiscal and economic policies as Puerto Rico tries to restructure nearly $70 billion of bonds.

"The board is warned that it must act in conformance with the law," Villafañe continued.

"The commitment of Governor Ricardo Rosselló is to achieve economies that allow government efficiency, doing more with fewer expenses, without affecting essential services to the people and without laying off public employees," Villafañe said.

Villafañe also criticized a statement by the board's new interim executive director, Ramón Ruiz Comas. According to the El Vocero news web site, Ruiz Comas told WKAQ 580AM on Tuesday morning that if Rosselló didn't present an acceptable fiscal plan by the end of February, the board would provide its own and the plan would be considered the legally valid plan.
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Old 02-27-2017, 07:14 AM
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https://www.forbes.com/sites/ikebran.../#492ddeda4e37

Quote:
It's More Important To Get Puerto Rican Pension Reform Right Than To Do It Fast

The drumbeat for an immediate and permanent solution to Puerto Rico’s pension crisis has been growing louder since Congress passed PROMESA last year, and it is underscored by recent developments on the island. Earlier this year, the Oversight Board put out a Request for Proposals for a “pension and retirement consultant,” the hiring process being run by former California Department of Finance chief Ana Matosantos and American Enterprise Institute pension expert Andrew Biggs. That consultant’s mandate is, among other things, to produce “a review of the existing benefits and their sustainability.”

That request came one day after Elias Sanchez, Puerto Rico Governor Ricky Rossello’s representative to the Oversight Board, announced a “major restructuring” of government spending that would allow his administration to continue to pay into pension systems, citing the need to provide for their 180,000 pensioners. Part of that restructuring appears to be already underway in the form of recently introduced “single employer” legislation on the island. The bill has been lauded by many as a step in the right direction, although there is a risk that it could push billions in pension liabilities of municipalities and public corporations to the Commonwealth’s already overburdened General Fund if not done properly.

However, while Puerto Rico’s pension system is a mess and needs major changes to make it solvent, we would all do well to slow down and take a breath. As we outlined in a previous piece, actuaries estimate that the system will be more or less cash flow neutral for the next few years, and there is enough money in the system, together with contemplated current year contributions, to keep pensions running on schedule for several more years. The government should take heed to avoid letting a crisis mentality force it to piece together a substandard reform plan in haste that fails to make structural reforms to its pension plan.

Governments with fiscal problems often resist making significant pension reform, since those affected complain quite loudly. For instance, despite a court ruling that cities could alter their pension obligations in Chapter 9 during Stockton, California’s protracted bankruptcy battle, several bankrupt California cities, including Stockton, Vallejo, and San Bernardino, ultimately chose to forego reform, fearing a ferocious and costly fight from the California Public Employees Retirement System. In his ruling approving Stockton’s eventual exit from bankruptcy protection, the same judge called CalPERS a “bully” with an “iron fist.”

....
Puerto Rico Oversight Board member David Skeel decried the Detroit approach in an op-ed he penned for the Wall Street Journal last year, writing that “the rule of law took a beating in the Detroit bankruptcy. Holders of the city’s general-obligation bonds, which had the same priority as pensions, got stiffed, receiving roughly 41% of what they were owed. Pensioners got at least 60%.”

Despite the unambiguous failure of Detroit to protect creditors’ rights and re-establish market access, a few concessions extracted from pensioners by Detroit warrant further scrutiny. The City obtained court approval for a small reduction in base benefits as well as modest reductions in system administered benefits, including cost-of-living-adjustments. And in yet another potential blueprint for Puerto Rico, active employees received a different deal than the then current retirees. However, the city continues to struggle financially because it punted on numerous other difficult decisions, leaving Detroit with the need to address its impending pension funding cliff.

In contrast, the Northern Mariana Islands, a U.S. Territory with a population of 55,000 afflicted with its own pension woes, developed more creative solutions that are worth examining. After unsuccessfully filing for Chapter 11, the pension system reached a class action settlement with the labor unions that shifted obligations into a VEBA-type structure at 75% of the current benefits, with benefits ratcheting up under certain fiscal conditions.

While Puerto Rico has access to a different restructuring regime through PROMESA and would not have to work within these exact frameworks, the lessons from California, Detroit and the Northern Mariana Islands should sow the sort of creative thinking that Gov. Rossello and the Board need to engage in if they hope to secure Puerto Rico’s financial future and keep its pensions solvent in the long run.

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  #89  
Old 02-27-2017, 07:40 AM
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http://www.reuters.com/article/us-pu...-idUSKBN1650GZ

Quote:
In Puerto Rico, pensions' decline pits retirees against lenders


As Puerto Rico attempts to sort out its tangled financial web, retirees may face bigger cuts than those in past U.S. municipal insolvencies, due in part to an unconventional debt structure that pits pensioners against the very lenders whose money was supposed to sustain them.

The U.S. territory is doing all it can to present itself as a reliable place to invest, but resolving the pensions issue will require a careful balance.

Benefit structures are widely seen as unsustainable, but draconian cuts to pensioners could deepen the population's reliance on government subsidies and compound rampant emigration.

"Many of our retirees are already under the poverty line," Puerto Rico Governor Ricardo Rossello told Reuters in an interview this past week, saying any pension cuts would attempt to protect the poorest beneficiaries. "Impacting them would be to cast them out and challenge their livelihood."

The tropical island, struggling with a 45 percent poverty rate and unemployment more than twice the U.S. national average, is working to restructure nearly $70 billion in debt. Public pensions, which owe $45 billion in benefits, are also virtually insolvent after generations of lawmakers ignored growing funding gaps or botched attempts to close them.

Now the pensions have almost no cash and a nearly 100 percent funding shortfall that is thought to be the largest ever for comparably-sized U.S. public pensions. Paying pension benefits out of the island's general fund, on a pay-as-you-go basis, could cost Puerto Rico $1.5 billion a year.

.....
PENSIONERS, LENDERS CLASH

But Puerto Rico's pensioners will not take deep cuts to benefits lying down. They have formed a negotiating committee, advised by Robert Gordon, an attorney who advised retirees in Detroit's landmark 2013 bankruptcy, and Hector Mayol, the former administrator of Puerto Rico's pensions and also a lawyer.

But their prospects are dimmer than retirees in Detroit, whose benefit cuts were generally limited to a few percentage points, or the elimination of cost of living adjustments.

Puerto Rico's "unusual circumstances mean that it will not conform exactly" to recent public bankruptcies, in which "judges reduced creditor claims far more than amounts owed to pensioners," Moody's Investors Service wrote earlier this month.

The sheer size of Puerto Rico's pension gap is one such unusual circumstance, while the peculiar debt structure that pits some retirees against the pension's own lenders is another.

Puerto Rico's largest public pension, known as the Employee Retirement System (ERS), covers nearly 100,000 retirees and is slated to run out of cash this year. In addition to paying retiree benefits, ERS is on the hook for $3.1 billion to repay bonds it issued in 2008 - specifically to keep the pension afloat.

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Old 03-14-2017, 05:40 PM
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http://www.bondbuyer.com/news/region...1127487-1.html

Quote:
Puerto Rico Board Approves Plan Paying 26% of Debt Due

The Puerto Rico Oversight Board approved a 10-year fiscal plan that will allow the payment of 26.2% of debt due.

The board's action in New York on Monday offers less for debt payment than Gov. Ricardo Rosselló's first proposed fiscal plan, which allocated money sufficient to pay as much as 35% of debt service.

The board is allotting $7.87 billion from the present through the end of fiscal year 2026, according to the plan. This would be 26.2% of the debt due from Puerto Rico and its public corporations and authorities covered by the plan.

Rosselló's plan, submitted on Feb. 28, had projected the payment of $10.5 billion for debt service and possibly past due bills in the next nine years.

According to the board's approved fiscal plan, the government has $1.3 billion in past due bills, quite apart from its defaulted-on debt. The board's plan sets aside money for the repayment of these bills from a different pool of money to be used for debt payments.

The approval of a fiscal plan "is certainly not the end of this process," said board member José González. "It is not, to paraphrase a famous phrase from a statesman in the 1940s, even the beginning of the end of the process. It is barely the end of the beginning of a long process to get Puerto Rico on the road to economic growth again."

After approving the measure unanimously, the board directed Gov. Ricardo Rosselló to submit by April 30 a detailed implementation plan, a proposed fiscal 2018 budget, and a revised Puerto Rico liquidity plan, including measures to generate a $200 million reserve by June 30 above the balance found in the certified fiscal plan.

....
The approved plan increased the cuts to pension spending to 10% while it is expected to be structured not to push people below the poverty line.

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