Judge approves debt restructuring plan for Puerto Rico

Judge approves debt restructuring plan for Puerto Rico

A federal bankruptcy judge on Monday approved a plan for Puerto Rico to restructure its debt, according to The Associated Press.

The deal requires Puerto Rico to pay $32 billion over 40 years, but officials said the island would save about $456 million yearly in debt service and lessen sales tax-backed debt by 32 percent.

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Senior bondholders will receive 93 percent of what their original bonds were worth. They hold about $8 billion. Junior bondholders will receive 54 percent of what their original bonds were worth. They hold about $10 billion.

The island's governor hailed the deal.

"Puerto Rico has taken an important step toward its total financial recovery," Gov. Ricardo Rosselló said in a statement obtained by the AP. "This represents more than $400 million annually that will be available for services in critical areas such as health, education, pension payments, and public safety, in compliance with other obligations."

It is the first deal since Puerto Rican officials announced in 2015 that the island would not be able to pay back its debts.

According to a Government Accountability Office report from 2018, Puerto Rico owes about $70 billion and had defaulted on over $1.5 billion in debt as of August 2015.

The report said annual deficits and the island borrowing money were major contributing factors to the debt.

The island was devastated by Hurricane Maria in 2017 and has since been rebuilding its infrastructure in addition to dealing with the debt crisis.