(Reuters) - Puerto Rico’s new government has hired Rothschild & Co to help it develop a fiscal turnaround plan and lead restructuring negotiations with creditors holding some $70 billion in debt, the government announced on Wednesday.
Rothschild will replace Millstein and Co, which had served as financial adviser under the administration of ex-Governor Alejandro Garcia Padilla.
Governor Ricky Rossello, who was sworn in on Jan. 2, had sharply criticized Garcia Padilla’s financial policies, which were shaped in large part by Millstein, during his campaign.
Rothschild’s hiring comes a few days after Rossello’s administration tapped law firm Dentons to serve as legal counsel, replacing Cleary Gottlieb, which had played that role for Garcia Padilla.
In a statement on Wednesday, Puerto Rico’s Fiscal Agency and Financial Advisory Authority, the U.S. territory’s primary fiscal agent, said the Rothschild team would be led by Todd Snyder, the firm’s restructuring chief.
“We selected Rothschild & Co based upon its commitment to Puerto Rico and its extensive track record advising in many of the most complex transactions in recent years,” Gerardo Portela, FAFAA’s executive director, said in the statement.
Puerto Rico faces months of complicated debt restructuring talks with myriad creditor groups. The U.S. territory owes $18 billion in general obligation debt, backed 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.
Under a federal rescue law known as PROMESA, passed last year, the island must submit a fiscal turnaround plan to a federal board appointed to manage the island’s finances. The board will also likely play a role in facilitating debt restructuring talks between the island and creditors.
Garcia Padilla had pushed for sharp reductions in debt payments to 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.
Reporting by Nick Brown; Editing by Frances Kerry