(Reuters) - Puerto Rico’s federal oversight board voted on Saturday to give the debt-laden U.S. territory more time to submit a fiscal turnaround plan and to restructure $70 billion in debt without fear of lawsuits.
The seven-member board voted at a public hearing in Fajardo, Puerto Rico, to extend to May 1 from Feb. 15 a so-called stay on litigation over missed debt payments, which was part of the federal Puerto Rico rescue law known as PROMESA passed last year.
The board also voted to extend to Feb. 28 from Jan. 31 the deadline for new Governor Ricardo Rossello to submit a fiscal blueprint for the U.S. territory’s return to economic stability, which the board must approve.
Puerto Rico, mired in an economic crisis, is trying to restructure government debt at many public agencies. Under PROMESA, creditor negotiations can be held out of court or through a legal process akin to U.S. bankruptcy.
The island’s projected liquidity gap grew to $2.3 billion by the end of the fiscal year, from $2.18 billion in a November projection, according to government advisers from Conway MacKenzie.
The higher figure owes to a projected increase in tax refunds and to contingencies set aside for uncertainties that might require big expenditures such as the precarious state of Puerto Rico’s public pensions.
With almost no money and some $46 billion in liabilities, the pensions could shift to a pay-as-you-go system this fiscal year. That could cost the government $950 million to $1 billion a year, said Mauricio Sanchez, a managing director at Conway.
Projections were just as bleak for the island’s Medicare system, which is on the verge of insolvency, due in large part to federal reimbursement levels lower than those for U.S. states.
While the island is lobbying Congress to increase the funding, the oversight board has called on Puerto Rico to prepare for the worst and find a way to save 28 percent annually in healthcare spending.
That would mean reductions in services and increased share of costs for patients, board member Ana Matosantos said at the meeting, on an island where 45 percent already live in poverty and unemployment is more than double the U.S. average.
The board announced on Saturday it hired Citigroup Global Markets as its financial adviser, and Ramon Ruiz-Comas as interim executive director.
Ruiz-Comas, the former chief executive officer of San Juan-based Triple S Management Corp, will serve until the board selects a permanent executive director.
Reporting by Nick Brown; Editing by Mark Heinrich and Alan Crosby