A top Puerto Rico senator is suggesting that the bankrupt island accept its own deeply distressed bonds as collateral - at nearly full-value, no less, Bloomberg News reported. The bill would allow local bondholders, known as bonistas del patio - a group of some 60,000 believed to hold $15 billion in securities - to use as much as 90 percent of the notes’ nominal value to obtain loans to nurture job-creating businesses. Commonwealth Senate President Thomas Rivera Schatz said the legislation is meant to encourage investment by freeing “dead capital.” But it could instead make the storm-ravaged island’s perilous financial situation even less tenable: If the loans sour, the government would acquire securities worth pennies on the dollar for a sizable net loss. “That enormous capital of $15 billion must be reactivated to facilitate local investment, production, job creation, increase exports and reduce imports," Rivera Schatz wrote in the bill.
