An Obama administration proposal aimed at stemming Puerto Rico’s spiraling fiscal crisis received a lukewarm reception before a hearing of the Senate Energy and Natural Resources Committee yesterday, with some Republicans asking for better data on the problem and some Democrats calling on the administration to show more ingenuity and urgency to solve it, the Washington Post reported yesterday. Speaking at a Senate hearing on the growing effect of the commonwealth’s economic crunch, a top Treasury Department official warned that the island’s debt crisis is morphing into a humanitarian one. “In the very near future, Puerto Rico will face impossible choices among providing essential public services, delivering promised pension benefits and paying its debt,” Antonio Weiss, the Treasury Department’s point person on Puerto Rico, told the Senate Committee on Energy and Natural Resources on Thursday. Weiss outlined a series of actions that the administration wanted Congress to consider to help Puerto Rico, which has been suffering through a decade-long recession and is buried under $73 billion in debt. He said lawmakers should create a new class of bankruptcy only available to U.S. territories that would allow Puerto Rico to restructure all of its debt. Sen. Lisa Murkowski (R-Alaska), the committee’s chairman, said that she was sympathetic to Puerto Rico’s plight but needs verifiable numbers about the island’s finances before she can help craft a solution. Puerto Rico has not produced an audited financial statement in two years and, she said, other financial reports have come up with widely varying numbers for the island’s debt-service costs. Read more.
In related news, Puerto Rico officials have called a meeting next week with advisers to some of the island’s bondholders after the Obama administration pressed Congress to give the U.S. territory a boost in its debt-restructuring negotiations, Bloomberg News reported yesterday. Investment banks representing several sets of creditors have been invited to meet the restructuring officials on Tuesday at the New York office of Cleary Gottlieb Steen & Hamilton LLP, the law firm representing Puerto Rico in its debt-reduction efforts. The planned meeting follows a proposal released on Wednesday by the U.S. Treasury Department and two other federal agencies that calls for giving the commonwealth unprecedented authority in restructuring its $73 billion debt burden through bankruptcy protection. The plan has drawn criticism, with some participants in the municipal bond market referring to the powers Puerto Rico would get as "Super Chapter 9" because the island would be allowed to file for bankruptcy protection while U.S. states are not. Read more.
For the latest news and analysis on Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage.
