Hedge funds’ involvement in the Puerto Rico debt crisis is leading U.S. Representative Nydia Velazquez (D-N.Y.) to propose legislation that would force the firms to reveal more about their investments, Bloomberg News reported yesterday. Velazquez, who sits on House Financial Services Committee, wants hedge funds to file with the Securities and Exchange Commission whenever they acquire at least 1 percent of a company’s stock, down from the current 5 percent threshold. The bill she has drafted would apply the same disclosure requirement to debt and derivatives. Hedge funds have drawn scrutiny for snapping up Puerto Rico bonds, whose prices have tumbled as the island’s fiscal crisis escalated. Velazquez said that the funds may be advocating for spending cuts that would hurt Puerto Ricans and against legislation that would let some agencies file for bankruptcy, which would allow them to cut their debts in U.S. court. Read more.
In related news, Puerto Rico Governor Alejandro Garcia Padilla’s administration sent to the island’s legislature a bill that would give its main electricity provider power to restructure about $8.3 billion of debt, Bloomberg News reported yesterday. The Puerto Rico Electric Power Authority, known as PREPA, has been negotiating since August 2014 with its creditors on how to ease the utility’s debt payments and modernize a system that relies heavily on crude oil to produce electricity. PREPA faces a $1 billion shortfall for the fiscal year ending June 30, 2016, according to the governor’s legislation. The utility has a $196 million interest payment due to bondholders on Jan. 1. Read more.
For more news and analysis of Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage.
