SAN JUAN (Reuters) - Bondholders with nearly a third of Puerto Rico’s $17 billion outstanding General Obligation bonds on Tuesday unveiled a proposal for a debt restructuring they claim would help the island avoid outright default. Burdened by an overall $70 billion debt load that the government says it cannot pay and a 45 percent poverty rate that has led to a steady exodus of its American citizens back to the mainland, Puerto Rico faces economic collapse without a solution that either changes laws and/or involves an agreement with creditors. The bondholders, representing $5 billion of GO debt say they would defer principal repayments on their bonds through June 2020. The proposal was issued by an ad hoc group of GO bondholders, including mutual funds and others, represented by the law firm Paul Weiss Rifkind Wharton & Garrison.    In addition, the creditors said they would buy approximately $750 million in new debt at a 7 percent annual coupon and no principal repayments until 2020. “This exchange would save the Commonwealth $1.9 billion in debt service payments over the next five years,” according to the document. Puerto Rico’s government said the proposal failed “to solve the severe and real challenges” facing Puerto Rico. “Incurring additional debt at a higher cost is not the answer to the Commonwealth’s fiscal issues,” Melba Acosta, president of Puerto Rico’s Government Development Bank, said in a statement. “Indeed it is exactly the type of ‘Wall Street’ solution that led us to the precipice we are now looking over.” The same bondholders earlier criticized legislation currently being rushed through Puerto Rico’s Senate and House on Tuesday that would halt bond payments ahead of a $422 million debt bill owed by the Government Development Bank due on May 1. The Senate approved the controversial legislation early on Tuesday morning while the House continued its debate. It is expected to vote before the end of the day. “While we would like to negotiate with the Puerto Rican Government in private and in good faith, the debt moratorium it has proposed that is before the Puerto Rican legislature has prompted this public release,” Andrew Rosenberg, a lawyer with Paul, Weiss said in a statement accompanying the proposal. GO debt is backed by the full faith and credit of the government and is typically the senior debt paid before all others. 