House Republicans released a draft of a rescue plan for Puerto Rico yesterday that they hoped could quickly garner bipartisan support and win over skeptics on the island, on Wall Street and in Congress, the New York Times reported today. The plan, being drafted by Republicans on the House Natural Resources Committee, in consultation with Democrats in Congress and the Treasury Department, calls for putting Puerto Rico’s finances under a presidentially appointed oversight board — a bitter pill to many on the island. The plan would also establish guidelines for restructuring some portion of Puerto Rico’s $72 billion of debt, “where necessary.” While Puerto Rico would not be granted standing to seek relief in bankruptcy — something its leaders wanted — it could get some of the legal tools found in bankruptcy as long as it first jumps through a number of hoops. To some on the island, any federal oversight board at all is a deal-breaker. Shortly after a summary of the committee’s approach began to circulate late last week, the governor of Puerto Rico, Alejandro García Padilla, denounced it as “shameful and degrading,” and something that would deprive the island “of its own government.” The president of the Puerto Rican Senate, Eduardo Bhatia, said upon reading the proposal that he was deeply offended by the way it was written, which he said “was from the 18th century,” evoking “the worst colonial subjugations.” Read more.
In related news, some of Puerto Rico’s largest creditors, unsatisfied with a commonwealth debt-reorganization proposal and the direction of congressional legislation, are working together to draft their own restructuring plan, Bloomberg News reported yesterday. Representatives of bondholder groups and bond insurance companies met on Monday at the New York office of PJT Partners Inc., which is advising MBIA’s National Public Finance Guarantee Corp., to begin crafting a plan that would reduce Puerto Rico’s $70 billion in obligations. The commonwealth last week gave its creditors a revised restructuring proposal, which the people say includes losses that are larger than they’re willing to accept. The advisers and lawyers for traditional municipal-bond investors, hedge funds and insurers met as U.S. lawmakers move closer to legislation. The House Natural Resources Committee yesterday made public a discussion draft of a bill that would establish a control board to oversee Puerto Rico’s debt restructuring and annual budgets. It’s the most comprehensive legislation yet advanced by congressional Republicans to help address the island’s finances. Read more.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
