Commentary: The Fairness of Bankruptcy for Puerto Rico

Decades of shortsighted fiscal management, combined with the expiration of key federal programs, have left the Commonwealth of Puerto Rico with enormous debts that it is unable to pay, according to a commentary in The Hill on Monday by Retired Bankruptcy Judge Steven Rhodes, an advisor to Puerto Rico. The island has slashed services and raised taxes to stave off default, but its leadership has long warned that this path is unsustainable. Creditors -- who are far from blameless, having ignored the risks of investing in an island whose finances had been shaky for years -- want as much a return on their investment as they can recover, according to Rhodes. Puerto Rican officials, led by Governor Alejandro Garcia Padilla, want to honor their obligations while maintaining enough budget flexibility to protect the Commonwealth's 3.5 million American citizens. By organizing the process under the auspices of a federal bankruptcy judge, the law as currently constructed allows both parties to do just that, according to Rhodes.

The House Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs will hold a hearing on Tuesday at 11 a.m. ET titled "The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority."

Join experts next week in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium, Feb. 4-6, 2016. Click here to register!

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.

Analysis: Experts Debate Whether U.S. Is Headed for Another Recession

Some economists are warning that the U.S. economy could fall into recession in the months ahead, while others say that the country is in no immediate danger of that happening, according to an L.A. Times analysis yesterday. Lynn Reaser, chief economist for Point Loma Nazarene University in San Diego, says that the risks of recession are significantly higher today than three months ago, primarily because of financial markets and China's slowdown. In assessing recession risks, Paul Ashworth, chief U.S. economist for Capital Economics, primarily considered four indicators: payroll jobs, personal income, real business sales and industrial production. Aside from the decline in production, which has been weighed down by the strong dollar and the hard-hit energy sector, the rest are still growing at a healthy pace, he said. Bill Rochelle, editor at large at the American Bankruptcy Institute, said that there are problem spots around the country -- such as for-profit education businesses, small shopping centers and over-leveraged retailers, among others. And Rochelle sees a slight potential for more business for those who are trained to look for trouble. Commercial bankruptcies, which had been dormant in recent years, ticked higher at the end of last year compared with the same period in 2014. "One or two months isn't a trend," however, he says. "We'll have to wait and see."

Commentary: Despite Six Years of Bull Market, State and Local Governments Owe at Least $1 Trillion

Among the beneficiaries of the bull market over the past six years have been state and municipal pension funds, which the Great Recession had hit particularly hard, leaving many of the systems drowning in debt, according to a commentary in the Winter edition of the City Journal. Yet the real news about the bull market may be how little these giant retirement systems have recovered. In July, with stocks climbing to a six-year peak, the Pew Charitable Trusts reported that state and local pension debt nationally had shrunk little since 2009. "The gap between the pension benefits that state governments have promised workers and the funding to pay for them remains significant," the report observed. The situation only worsened as news began leaking out last summer that pension funds had notched mediocre returns for the fiscal year ending June 30, taking on even more debt. Then the market deep-dived in August, and Fitch Ratings issued a stark warning that public-pension funding "has barely improved since pre-recession highs." A big reason: millions of government workers keep racking up new pension credits every working day.

Analysis: Coal Company Bankruptcies Not Reducing America's Supply Glut

Production at coal mining companies that have declared bankruptcy in the past four years rose 3 percent on average through the third quarter of 2015, an analysis of four companies by Bloomberg News showed today. Mines formerly owned by James River Coal Co. posted a gain of 31 percent. Stockpiles held by utilities ended 2015 at a six-year high, data from the Energy Information Administration show. Some of the failed companies have restructured debt. Others have sold mines at bargain prices to former rivals. The glut -- at least 100 million tons, according to Bloomberg -- threatens to depress prices for years, prolonging a global rout in an industry that has already eliminated more than 26,000 jobs, 29 percent of its workforce, since 2012. More companies and jobs may be at risk.

Latest ABI Podcast Examines Current Oil & Gas Industry Distress, Provides Outlook for 2016

ABI's latest podcast features ABI Resident Scholar Prof. Melissa Jacoby talking with Deborah D. Williamson of Dykema Cox Smith (San Antonio, Texas) about the current distress in the oil & gas industry. Williamson, a co-author of ABI's When Gushers Go Dry: The Essentials of Oil & Gas Bankruptcy and a member of ABI's Commission to Study the Reform of Chapter 11, examines oil and gas company bankruptcies and provides an outlook for 2016.

Will exploration and production hit bottom in 2016? Be sure to attend ABI's Annual Spring Meeting in Washington, D.C., from April 14-17, as a panel of experts will be addressing this topic. Register here.

Have You Signed Up for Rochelle's Daily Wire? Don't Miss the Insights and Analyses of Important Case Decisions!

ABI Editor-at-Large Bill Rochelle provides his exclusive perspectives and analyses of important case decisions. New summaries appearing on today's Daily Wire include:

- Fourth Circuit Fixes One Issue of Tax Lien Subordination under BAPCPA

- Courts Spilt on Offsetting Government's Non-Tax Claim Against a Tax Refund

Tap into Rochelle's Daily Wire via the ABI Newsroom, Daily Headlines e-mail and Twitter!

USTP Announces Notice of Public Hearing and Reopened Comment Period for Proposed Procedures for Completing Uniform Periodic Reports in Non-Small Business Cases Filed Under Chapter 11 of Title 11

The U.S. Trustee Program (USTP) on Nov. 10 published in the Federal Register a notice of proposed rulemaking (NPRM) seeking public comment on the proposed rules requiring uniform periodic reports by debtors-in-possession or trustees in non-small business cases under chapter 11 and the proposed periodic report forms. After analyzing the comments to the NPRM and proposed forms, and because certain public commenters asked to meet with representatives of the USTP to discuss the NPRM and proposed forms, the USTP has decided to hold a public hearing on Feb. 17, 2016, from 10:00 a.m. to 1:00 p.m. ET in the Executive Conference Center in the Executive Office for U.S. Trustees in Washington, D.C. The hearing on the NPRM will provide an opportunity for interested parties to express their views directly to USTP officials. The USTP has also reopened the comment period and will accept new and supplemental comments from the public on or before Feb. 22, 2016, via www.regulations.gov. Those who register to attend and make a presentation at the public hearing must have either a written comment or statement on file by the registration deadline of Jan. 6, 2016. For more information, please click here.