NEW YORK (Reuters) - Puerto Rico’s new governor wasted no time seeking advisers to help the island restructure $70 billion in debt, requesting late on Tuesday that firms submit their qualifications as legal and financial advisers.
Governor Ricky Rossello, who was sworn in on Monday, had sharply criticized the financial policies of his predecessor, Alejandro Garcia Padilla, during the 2016 campaign.
Those policies were shaped in large part by law firm Cleary Gottlieb Steen & Hamilton and financial adviser Millstein and Co. Both firms have represented the island since 2014, as it descended into economic crisis.
The announcement from the Fiscal Agency and Financial Advisory Authority, the island’s primary fiscal agent, could bring the firms’ tenures to an end.
Garcia Padilla pushed for sharp reductions in debt payments to Puerto Rico’s creditors and ordered several defaults during his term. Rossello, who favors U.S. statehood for the island, believes it should try to limit such cuts while imposing belt-tightening measures like consolidating public agencies.
Firms have until Friday to submit their qualifications. Those that have represented Puerto Rico’s creditors are not barred from vying for a contract.
According to Puerto Rico’s comptroller’s office, Cleary and Millstein are under contract through this fiscal year, which ends on June 30, although Rossello can review those agreements. Cleary was to be paid $11 million, and Millstein was to get $9 million under the deals.
Puerto Rico owes $18 billion in general obligation debt, backed only by a constitutional promise; $15 billion in so-called COFINA debt backed by sales tax proceeds; and billions more in debt at public agencies like power authority PREPA and water utility PRASA.
Nearly half the island’s 3.5 million residents live in poverty. Its unemployment rate is more than twice the U.S. average, and its population continues to fall as locals flock to the U.S. mainland.
Creditors are barred from suing Puerto Rico over missed debt payments at least through Feb. 15 under a federal rescue law known as PROMESA. The law, passed last year, calls for the island to try to reach consensual compromises with creditors in the meantime.
Facilitating those talks will fall to a federal oversight board that has hired its own advisers. It is unclear how much clout Puerto Rico’s government advisers would have in those talks.
Reporting by Nick Brown; Editing by Daniel Bases and Lisa Von Ahn