Puerto Rico has offered a huge haircut to creditors that would reduce its debt by about $23 billion in the opening salvo to resolve its crippling $70 billion debt crisis, but the proposal was immediately slammed by one bond insurer.
With a 45 percent poverty rate and a steady exodus of its population to the United States, Puerto Rico is trying to crawl out of an economic swamp before substantial debt payments come due in May and July. The U.S. territory has defaulted on some debt and is trying to persuade creditors to take concessions.
The new plan announced on Monday would reduce a $49.2 billion chunk of debt by about 46 percent, to $26.5 billion, by offering creditors payout reductions under a new, so-called "base bond" with better legal protections. The cut to creditors was earlier reported by Reuters.
"We do not view this proposal as a serious effort," said Nader Tavakoli, president and chief executive officer of bond insurer Ambac, which insured $2.2 billion net par, or original face value, of Puerto Rico bonds as of the end of November. Ambac recently sued the U.S. territory over a recent debt default.