Board: Smaller surplus available for Puerto Rico creditors

SAN JUAN, Puerto Rico — The executive director of a federal control board overseeing Puerto Rico's public finances said Wednesday there will be a smaller surplus available for creditors, while a bond insurance company filed a lawsuit seeking to nullify a fiscal plan that aims to pull the U.S. territory out of its economic crisis.

Executive director Natalie Jaresko told reporters that Puerto Rico's government could see a $35 billion surplus in the next 30 years, $4 billion less than originally projected in the fiscal plan approved recently by the board. She noted not all the money would necessarily go to creditors seeking to recover part of their investment in Puerto Rico bonds as the government tries to restructure a portion of its more than $70 billion public debt load amid an 11-year recession.

"It's a basis for what's available," she said.

Assured Guaranty Corp., which insures $1.4 billion in Puerto Rico general obligation bonds, filed a lawsuit Wednesday asking a judge to invalidate the fiscal plan. It argues the board did not have the power to develop or approve the fiscal plan, which will serve as a type of blueprint for Puerto Rico's economy in upcoming years.

The suit also claimed Puerto Rico's government has not used the $147 million it received in diverted funds when it warned of a liquidity crunch amid the crisis, calling it "a cynical tactic to gain leverage in restructuring negotiations."

A spokesman for Puerto Rico's financial authority, which is also named in the suit, did not return a message for comment. Jaresko said she would not comment on pending litigation, though she added that she believes the board has the authority to certify and enforce the fiscal plan.

The board, which was created by Congress, is currently revising the plan to incorporate changes reached in a deal with Gov. Ricardo Rossello days ago, including reversing a decision to eliminate a Christmas bonus and reduce vacation and sick days for public workers. This would only happen if Puerto Rico's legislature agrees to at-will employment, in which private employers would be able to dismiss workers at any time without having to prove just cause.

Jaresko warned that Puerto Rico would suffer if legislators don't vote in favor of that change.

"It unfortunately ensures that Puerto Rico will remain ... in poverty," she said. "... My hope is that the legislature understands they have a very important role on putting Puerto Rico back on this very hopeful path."

Top legislators said Tuesday that they have several concerns about at-will employment.

The board has said it expects to approve a revised fiscal plan and a government budget for the upcoming fiscal year by June 29.