Editor's Note: This story has been updated to show a change in the number of federal credit unions in Puerto Rico.
SAN JUAN, Puerto Rico–Bondholders—including credit unions—that hold approximately $35 billion of this island’s total debt load said they have reached an agreement on terms as the island’s government works through the bankruptcy process.
The federally appointed oversight board in charge of Puerto Rico’s ongoing record debt restructuring said the agreement on the $35 billion, which accounts for nearly 50% of the total debt load, still need to be approved by the judge overseeing the bankruptcy process. If an agreement is approved, it will cut the Commonwealth’s outstanding bond debt from $35 billion to approximately $11 billion, CNBC reported.
Credit unions are part of a group of bondholders representing approximately $8 billion of bonds that also includes traditional municipal investors, according to the oversight board.
Minimal Risk to NCUSIF
As CUToday.info reported here, NCUA has downplayed any potential risk to federally chartered credit unions here after Puerto Rico defaulted on a $58-million payment on bonds that are largely held by credit union members.
The agency said it’s important to distinguish between the seven federal credit unions in Puerto Rico that are regulated and insured by NCUA and the 115 cooperativas that are chartered by Puerto Rico and insured by a separate entity, COSSEC.
“Any exposure on the part of the federal credit unions to the bonds in question issued by Puerto Rico is minimal,” the agency said in a statement. “This minimal exposure does not represent a material risk to the Share Insurance Fund.”
NCUA issued an unofficial estimate that the cooperativas hold $1.3 billion in Puerto Rican government and government-related bonds.
Specifics of Agreement
The new agreement sees a reduced debt repayment timeline by 10 years compared with the prior 2019 Plan of Adjustment, which means the Commonwealth would retain the last 10 years of cash flow totaling nearly $5 billion, according to CNBC.
According to CNBC, of the more than $13 billion in outstanding general obligation or “GO” bonds covered in the plan, the bonds issued pre-2012 would receive between 70.8 and 74.8 cents on the dollar, while the 2012 and 2014 GO bonds would receive 69.8 cents on the dollar and 65.4 cents on the dollar, respectively.
Puerto Rico’s credit unions, both federally insured and non-federally insured, continue to rebuild following Hurricane Maria and, more recently, several earthquakes.