(Reuters) – Puerto Rico’s federally created financial oversight board said on Sunday it has entered into an agreement with bondholders to provide “a framework for a plan of adjustment” to address $35 billion of claims against the bankrupt U.S. territory.
The agreement establishes terms for the restructuring of more than $18 billion of Puerto Rico’s General Obligation (GO) and Public Buildings Authority (PBA) debt, according to the Financial Oversight and Management Board, which filed a form of bankruptcy for the island in 2017 in an effort to restructure about $120 billion of debt and pension obligations.
While the deal has the support of creditors holding about $3 billion in GO and PBA claims, it faces opposition from Puerto Rico’s government.
The deal will be part of a debt-adjustment plan the oversight board said it expects to file in federal court within 30 days to address Puerto Rico’s pension and other core government debt.
The board, which reached a deal with a retirees committee last week over a more than $50 billion of unfunded pension liability, said bondholders and other parties acknowledge that “Puerto Rico’s difficult financial situation requires a meaningful reduction in its debt burden to a sustainable level.”
The Puerto Rico Fiscal Agency and Financial Advisory Authority on Sunday reiterated its opposition to the upcoming plan of adjustment mainly because it includes a reduction in pension payments to certain retirees.
“The oversight board, creditors and other interested parties are well aware that without participation of the Government of Puerto Rico through legislative, executive and administrative action, no plan is feasible, no agreement can be executed, and no security will be marketable,” the authority said in a statement.
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