By Dánica Coto, Associated Press
SAN JUAN, Puerto Rico (AP) — A court hearing on a major restructuring of Puerto Rico’s massive debt opened on Wednesday, with protesters warning the deal would further indebt the U.S. territory and supporters arguing it would secure funds that the government urgently needs.
The hearing involves more than $17 billion worth of debt backed by sales-tax bonds that the government issued, representing nearly a third of Puerto Rico’s overall bonded debt. The restructuring plan was recently approved after more than 8,000 bondholders voted on it, according to a federal control board that oversees the island’s finances and supports the plan, calling it key to Puerto Rico’s recovery.
As the session opened, Judge Laura Taylor-Swain said she has received hundreds of letters, emails and messages from people including those “who invested entire retirement savings and plead they need to be paid in full to survive.”
She said everyone’s concerns are significant and meaningful, but that there are contracts and legal agreements that have to be addressed.
“There is no decision that can perfectly reconcile all concerns,” she said.
If approved, the deal will mean 40 years of payments for Puerto Rico’s government. Senior bondholders, who hold nearly $8 billion, will be first to collect, receiving 93 percent of the value of the original bonds. Junior bondholders, many of whom are individual Puerto Rican investors and overall hold nearly $10 billion, will collect last and recover only 54 percent.
Economist Martin Guzmán, a research associate at Columbia University, warned this week that if the plan is approved, Puerto Rico would pay $32 billion in the next 40 years.
He said it is hard for people to understand the effect that such a deal will have on their lives before they start feeling it.
“Puerto Rico risks becoming an island for the few, with an elite that will be living comfortably and for the middle class to develop their dreams elsewhere,” he said.
During the hearing, government attorney Peter Friedman said the deal would lock in money for the government so it can continue to provide essential services.
“Bondholders will not give more money if this deal is rejected,” he said. “What we can’t afford is losing and getting nothing.”
More than 100 protesters gathered in front of the courthouse ahead of the hearing. As attorneys began filing into the courthouse, protesters yelled, “Vultures! Vultures!” while some raised their middle fingers.
“Vultures! Vultures!” people shout as attorneys arrive for a major debt restructuring case being heard in federal court today in Puerto Rico pic.twitter.com/USNfeZY5qi
— Dánica Coto (@danicacoto) January 16, 2019
Johnny Rodríguez, a 57-year-old government worker who traveled nearly an hour from the eastern mountain town of Juncos, said he wanted to defend the people of his island.
“We’re the victims,” he said. “Given the situation that the island is going through, they are condemning future generations and forcing them to carry this debt.”
Also at the protest was former Puerto Rico Sen. María de Lourdes Santiago, who took a megaphone to decry what she said was a federal control board damaging the future of Puerto Rico.
She called the restructuring deal “socialism for the rich” and said she worries the government will be forced to take away funds and essential services from the people to pay its debt.
Dozens of protesters are gathering outside a federal courthouse in Puerto Rico as a judge prepares to hear a major debt restructuring case that critics say will only further indebt the U.S. territory if approved. pic.twitter.com/v6uvNjYXw7
— Dánica Coto (@danicacoto) January 16, 2019
It is unclear when a ruling in the case would be issued. Taylor-Swain has set aside two days for the hearing. If approved, it would be the second debt-restructuring deal since Puerto Rico announced it was unable to pay its debt in June 2015.
Puerto Rico’s government declared a form of bankruptcy in May 2017. In November 2018, it completed its first debt-restructuring deal with creditors holding more than $4 billion in debt issued by the now-defunct Government Development Bank, which once issued loans and oversaw the island’s debt transactions. That same month, Gov. Ricardo Rosselló approved a measure authorizing the deal involving bonds backed by a sales-and-use tax without any public hearings.
Puerto Rico has seen its population dwindle from 3.7 million to 3.2 million in roughly a decade as a result of the economic crisis, coupled with the aftermath of Hurricane María, which hit in September 2017 as a Category 4 storm and caused more than an estimated $100 billion in damage.