Leading House Republicans declared their opposition yesterday to allowing debt-ridden Puerto Rico access to chapter 9 bankruptcy protections, raising new uncertainty about how the island can emerge from its financial crisis, the Associated Press reported yesterday. A statement from House Judiciary Chairman Bob Goodlatte (R-Va.) said that members of his committee share a concern that "to provide Puerto Rico's municipalities access to chapter 9 of the Bankruptcy Code would not, by itself, solve Puerto Rico's difficulties, which are associated with underlying, structural economic problems." The White House and leading Democrats, including presidential candidate Hillary Rodham Clinton and Sen. Chuck Schumer (D-N.Y.), have suggested bankruptcy as a possible way out of Puerto Rico's economic crisis. As a U.S. territory, Puerto Rico is prohibited from allowing its municipalities, such as a debt-burdened state-run power company, to enter bankruptcy protection as a way to restructure their debts. Schumer is pursuing legislation to change that, though he has not yet succeeded in attracting Republican co-sponsors. Read more.
In related news, Puerto Rico’s representative in Congress, Resident Commissioner Pedro Pierluisi (D), made a statement on the floor of House urging for Congress to move forward on solutions to Puerto Rico’s debt crisis. Click here to read his statement. Read more.
Additionally, Citigroup Inc. intends to host a meeting of Puerto Rico bondholders on Monday in New York that will include a presentation by former International Monetary Fund official Anne Krueger, the Wall Street Journal reported today. A recent report by Krueger, former first deputy managing director of the IMF, recommended reducing the commonwealth’s debt payments by offering to exchange some debt for new bonds with longer maturities. Citi has handled such exchanges in the past, including a deal to buy back and refinance water and sewer bonds that helped Detroit save money during its bankruptcy. Puerto Rico has about $72 billion in debt outstanding and is struggling with a weak economy and declining population. Some Puerto Rico bonds sold last year traded Wednesday at about 70 cents on the dollar, after touching all-time lows of around 64 cents last week, according to the Electronic Municipal Market Access website. Read more. (Subscription required.)
