Puerto Rico bankruptcy battle ends

SAN JUAN, Puerto Rico — Puerto Rico’s nearly five-year bankruptcy battle was resolved Tuesday after a federal judge signed a plan that slashes the U.S. territory’s public debt load as part of a restructuring and allows the government to start repaying creditors.

The plan marks the largest municipal debt restructuring in U.S. history and was approved after the judge held heated hearings in recent months and as the island struggles to recover from deadly hurricanes, earthquakes and a pandemic that deepened its economic crisis.

“Congratulations, Puerto Rico!” tweeted Natalie Jaresko, executive director of a federal control board appointed to oversee Puerto Rico’s finances that had been working with the judge on the plan. “Financial stability. A new chapter to lead to renewed economic prosperity!”

The board said that the plan signed by federal judge Laura Taylor-swain cuts Puerto Rico’s public debt by 80 percent and saves the government more than $50 billion in debt service payments. Jaresko noted that the plan reduces claims against the government from $33 billion to just over $7.4 billion. It also avoids proposed pension cuts that had led to heated debates and long created a rift between the board and Puerto Rico’s legislature and the island’s governor, which vehemently opposed them.

The plan that restructures the central government’s debt notes that Puerto Rico has sufficient resources to pay the debt through 2034, but critics have said the government does not have the finances required to meet debt service payments and warned of more austerity measures.

Still pending is the debt restructuring of some government agencies, including that of the Puerto Rico Electric Power Authority, which holds the biggest debt.

Gov. Pedro Pierluisi said that while the plan approved Tuesday is not perfect, it represents a big step for the island’s economic recovery.

“We still have a lot of work ahead of us,” he said.

José Luis Dalmau, president of Puerto Rico’s senate and a member of the main opposition party, also praised the plan and called it a transcendental step for the island’s economic recovery.

“From this moment on, a new page of fiscal responsibility, good governance and unity begins, which will lead to a more prosperous economy, a climate of job creation and greater fiscal stability,” he said