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Old 01-20-2016, 06:01 AM
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Mary Pat Campbell
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SAN JUAN, P.R. — Four months after announcing a grueling five-year plan for reducing the island’s vast debt and reviving economic growth, Puerto Rico’s top economic officials said on Monday that they had been too optimistic and revised the plan for the worse.

When the government first released its five-year plan last September, it warned creditors that it would need $14 billion of debt relief over that period, because it did not have enough money to pay them the total amount due, $28 billion.

In a briefing for journalists on Monday, officials said they now expected to need a $16 billion break from creditors.

The officials said they had run updated forecasts for 10 years as well, and things did not get much better. Over the full 10 years, they said, they would need $24 billion worth of reductions in the total $63 billion in principal and interest that various branches of government owed creditors.

With inadequate revenue and no ability to borrow, Puerto Rico’s cash has been drying up. The island was able to make a number of large, high-priority debt payments due on Jan. 1 only by taking money away from lower-ranking creditors. The island’s next significant debt payment, of $400 million, is due in May from the Government Development Bank.

The development bank is important because it orchestrates most of Puerto Rico’s complex web of debt, and because it has the increasingly difficult job of making sure all branches of government have adequate cash. There are concerns that if it ran into severe problems, they would spread to other parts of the government.

And on July 1, so many debt payments are due that the officials said that without relief, there would be defaults from the top to the bottom of the hierarchy of creditors. When questioned further, they said it was still too soon to reveal how much relief they would seek from each creditor group.
Mr. Lew and other Obama administration officials have been urging Congress to enact measures they say would help it restructure its $72 billion of debt in an orderly manner. In particular, the administration has argued that Puerto Rico needs access to a legal framework, like bankruptcy, that would automatically stay creditor lawsuits and make it possible to force dissident creditors to accept settlements. As currently written, the bankruptcy code bars Puerto Rico’s cities or other bodies of government from using Chapter 9, the provision that insolvent cities and counties on the mainland have been able to use to shed debt.


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