Puerto Rico has rejected a bondholder group’s offer to issue the territory additional debt as a response to the devastation of Hurricane Maria. Officials with Puerto Rico’s Fiscal Agency and Financial Advisory Authority said the offer was “not viable” and would harm the island’s ability to recover from the storm.
The PREPA (Puerto Rico Electric Power Authority) Bondholder Group made the offer on Wednesday, which included $1 billion in new loans, and a swap of $1 billion in existing bonds for another $850 million bond. These new bonds would have jumped to the front of the line for repayment, and between that increased value and interest payments after the first two years, the bondholders would have likely come out ahead on the deal, despite a nominal $150 million in debt relief.
Indeed, the offer was worse in terms of debt relief than one the bondholder group made in April, well before hurricanes destroyed much of the island’s critical infrastructure.
Puerto Rico’s Fiscal Agency and Financial Advisory Authority suggested that profit motive rather than altruism was the bondholder group’s real goal. “Such offers only distract from the government’s stated focus and create the unfortunate appearance that such offers are being made for the purpose of favorably impacting the trading price of existing debt,” the agency said in a statement.