Plan of Adjustment


The proposed Plan of Adjustment provides a framework for Puerto Rico to exit bankruptcy and restore access to capital markets. The fiscal crisis has caused every resident of Puerto Rico pain and is blocking any chance of a true economic recovery.

Leaving bankruptcy behind is the first step to enable Puerto Rico to recover, grow, and prosper again. The Plan of Adjustment would bring an end to Puerto Rico’s fiscal and financial uncertainty.

Reduce Puerto Rico's debt to sustainable levels

Terms of the Plan of Adjustment

PROMESA gave the Oversight Board authority to restructure Puerto Rico’s debt. The Plan of Adjustment filed with the U.S. District Court for the District of Puerto Rico, which has jurisdiction over PROMESA, provides a framework to restructure some $35 billion of liabilities (bonds and other claims) and $50 billion of unfunded pension liabilities and reduces Puerto Rico’s debt to sustainable levels.

The proposed Plan of Adjustment restructures Commonwealth claims, including:

The Oversight Board reached agreements with retirees, certain bondholders, and public service employees who support the Plan as a compromise to lift Puerto Rico out of the bankruptcy-like situation it is in right now.

Commonwealth Claims

Puerto Rico’s Central Government has about $13.4 billion of general obligation (GO) bonds and direct obligations outstanding and $5 billion of other guaranteed debt. The GO bondholders claim they have priority over the Government revenues from taxes and fees.

Reduction of unchallenged
GO Bonds is 36% 

Local retail bondholders given opportunity to elect taxable bonds with monthly interest payments

Settlement proposal for holders of challenged GO bonds and Commonwealth guaranteed claims offers reduction between 55% and 65%

Unsecured Creditors with claims less than $10,000 will recover the full amount, creditors with more substantial claims receive a 96% reduction in debt

Employee Retirement System Bonds

The Employees Retirement System (ERS) is a trust established to provide pension and other benefits to retired employees of the Government, most of the public corporations and the municipalities. ERS has approximately about $3.2 billion of bond payable from by ERS assets and employer contributions to ERS.

Reduces bonds by 87%


The Puerto Rico Public Buildings Authority (PBA) is a public corporation whose primary purpose is to construct and lease government buildings, and it is used as a vehicle to issue Government bonds. PBA has approximately $4.6 billion in bonds outstanding.

FOR HOLDERS OF UNCHALLENGED PBA BONDS and 42% for challenged bonds

When PROMESA was enacted in 2016, it allowed the Puerto Rico Government and its instrumentalities, like PREPA, to stop all debt payments to allow for the restructuring of the debt.That stay was replaced by the automatic stay under the Bankruptcy Code when the relevant entities commenced their respective Title III cases under PROMESA, and Puerto Rico has not made most of its debt payments since.The stay will eventually be lifted and without the restructuring, Puerto Rico would be legally obligated to pay the full debt unless a Plan of Adjustment is approved by the court.

The Plan of Adjustment establishes a litigation trust that will receive the potential savings from settling with the holders of the challenged bonds. Should the court invalidate the bonds, the Commonwealth would save money it set aside in case the court would decline to invalidate their bonds. The Government of Puerto Rico would receive 33% of those savings.

For the U.S. District Court to confirm the proposed Plan of Adjustment, the Plan must be feasible and in the best interest of creditors. That means it provides creditors, including bondholders and retirees, with all they can reasonably expect under the circumstances.

To determine whether the Plan is confirmable, the Court is charged with considering what all creditors would collectively receive if each were to litigate their claim in court by themselves, which would leave many creditors with no recovery at all.

The debt payments need to be feasible for Puerto Rico. That means the Government’s income and expense projections that are the basis for how the Oversight Board determined the payments to creditors have to be realistic and attainable.

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