Puerto Rico Bankruptcy Judge Set to Approve Modified Debt Plan

The judge overseeing Puerto Rico’s bankruptcy directed the island’s financial oversight board to revise its debt-restructuring deal by Friday and plans to confirm that workout plan soon after.

U.S. District Court Judge Laura Taylor Swain detailed changes she wants the board to make to the debt adjustment plan and submit the revised version by Friday, 11:59 p.m. Atlantic Standard Time, which is 10:59 p.m. Eastern Standard Time, according to an order filed late Monday.

It could mean that Puerto Rico’s more than four-year bankruptcy process, the largest ever in the $4 trillion municipal-bond market, may finally begin to wind down this month. Once the board files the revised plan on Friday, Swain would then “promptly” submit her confirmation order approving the debt restructuring plan, according to the judge’s order.

The oversight board is reviewing Swain’s order and intends to file the revised debt plan by Friday, Matthias Rieker, spokesperson for the board, said in a statement Monday following Swain’s order.

“The oversight board welcomes this latest progress towards confirmation of the plan, which would significantly reduce the Puerto Rico government’s total liabilities,” Rieker said in the statement.

The restructuring deal would reduce $33 billion of debt and other obligations, including cutting $22 billion of bonds to $7.4 billion. It would ease Puerto Rico’s annual debt service payments and establish a reserve trust for its broke pension system, which owes current and future retirees an estimated $55 billion.

Swain’s revisions including treating allowed eminent domain claims as secured, rather than unsecured, and that Puerto Rico must pay the full amount of what a court determines is the value of those claims, according to the order.

Swain’s order included a 149-page findings of fact and conclusions of law and a 93-page confirmation order for the plan of adjustment that the court is prepared to file “promptly” once the board submits its revised debt plan.