Puerto Rico May Need $2.5 Billion Debt Cut Annually
Puerto Rico will need about $2.5 billion of debt relief each year in the medium term after calculating potential spending cuts, according to a Height Securities analyst. After taking into account savings from potential reductions in education, health care and wage cuts and freezes, the commonwealth may still face a $2.5 billion gap per year in the medium term, Daniel Hanson, an analyst at Height Securities, a Washington-based broker dealer, wrote in a report Thursday. Hanson’s calculations are based on local reports of spending cuts as part of a debt-restructuring plan that the commonwealth hasn’t released yet, he said. A $2.5 billion annual shortfall “implies that the commonwealth is still intending to deeply haircut bondholders of many (or most) Puerto Rican bonds,” Hanson wrote. Puerto Rico and its agencies owe $72 billion after years of borrowing to fill budget deficits. Governor Alejandro Garcia Padilla in June said the commonwealth was unable to repay all of its obligations on time and in full. The island’s economy has contracted every year but one since 2006. Read more.
Thursday, August 27, 2015