Puerto Rico exits bankruptcy after grueling debt negotiation

SAN JUAN, Puerto Rico (AP) — Puerto Rico’s government formally exited bankruptcy Tuesday, completing the largest public debt restructuring in U.S. history after announcing nearly seven years ago that it was unable to pay its more than $70 billion debt.

The exit means that the U.S. territory’s government will resume payments to bondholders for the first time in several years and will settle some $1 billion worth of claims filed by residents and local businesses.

“This is a significant success,” said Natalie Jaresko, executive director of the federal control board that oversees Puerto Rico’s finances and its debt restructuring process. “Remaining in bankruptcy has been a drag on the economy in multiple ways.”

The bankruptcy led to widely criticized austerity measures on an island that paid some $1 billion in fees to consultants and lawyers and in other expenses during the process.

The exit was a priority for the board and Jaresko, who previously announced she is retiring April 1. A replacement has not been named yet. The board is expected to remain in place until Puerto Rico has four consecutive balanced budgets, a feat that has yet to be achieved.

The debt restructuring plan was approved by a federal judge in January. It reduces claims against Puerto Rico’s government from $33 billion to just over $7.4 billion, with 7 cents of every taxpayer dollar going to debt service, compared with 25 cents previously.

“This is a transcendental moment,” said Gov. Pedro Pierluisi. “The plan is not perfect ... but it has a lot of good things.”

The board has clashed several times with Pierluisi and previous administrations, particularly on a proposal to reduce certain monthly pension benefits that was ultimately scrapped.

The plan also deposits $1.5 billion into public pension systems...