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Republicans on the House Natural Resources Committee yesterday introduced a new measure aimed at giving Puerto Rico the tools to restructure about $70 billion in debt, MorningConsult.com reported today. The legislation — H.R. 5278, sponsored by Rep. Sean Duffy (R-Wis.) — includes several “minor” changes to the previous measure, H.R. 4900, according to Committee Chairman Rob Bishop (R-Utah). According to a Natural Resources Committee summary, the new measure would block a new Labor Department overtime rule from applying to Puerto Rico. The changes also include language that clarifies the fiscal oversight board’s authority to protect prioritized payments to bondholders. Those payments are required by the commonwealth’s constitution. The legislation also bars Puerto Rico’s governor “from executive any budgetary adjustment” between the enactment of the bill and the establishment of its oversight board, and has language to “reiterate the promotion of voluntary restructuring agreements and explicitly honor voluntary agreements that are already in place,” the summary said. Click here to read the bill summary prepared by the House Natural Resources Committee. 

Click here to read Rep. Pedro Pierluisi’s statement on the new Puerto Rico legislation. 

In related news, Puerto Rico Governor Alejandro García Padilla declared a state of emergency for the island’s Highways and Transportation Authority, suspending the transfer of toll-road revenue to bondholders and imposing a stay on legal claims, Bloomberg News reported yesterday. While the order doesn’t establish a moratorium on bond payments, it halts a revenue stream to investors that wasn’t subject to the “clawback” initiated last year on fuel taxes to pay holders of commonwealth guaranteed obligations. Standard & Poor’s said in a report last month that Puerto Rico will make its July 1 debt service payments of $220.7 million on highway securities by tapping reserve funds. It might not have enough stored away to pay in January, the ratings company said at the time. Read more. 

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

Leaders of the New Jersey’s legislature said yesterday they were working on a bill that would reconcile competing approaches to fix Atlantic City, Bloomberg News reported yesterday. State and city officials have been fighting for weeks over the level of state control and whether the municipality could enact deeper spending cuts that could mean new labor contracts for workers. State intervention wouldn’t necessarily prevent creditors from being saddled with losses, said Jim Colby, who runs the $1.9 billion Market Vectors High Yield Municipal Index exchange-traded fund at Van Eck Global. Colby pointed to Detroit, which was in the hands of a state-appointed emergency manager who led it into a record bankruptcy resolved in part through a debt restructuring. Governor Chris Christie (R) has indicated he could let Atlantic City go into court protection.

Retired Bankruptcy Judge Steven Rhodes is so confident lawmakers will pass a plan to avoid bankruptcy by Detroit Public Schools, that he is not working on a plan B just in case that does not happen by July 1, Fox2Detroit.com reported yesterday. Judge Rhodes on the potential bankruptcy asserts, "This is not going to happen. I discount that possibility." Rhodes believes that the House Republicans are "committed to a solution" and he views the passage of their plan as "a statement they are committed to DPS." Having said that, he again endorsed the senate GOP plan which contains more money for the embattled district and the Detroit Education Commission and without that he concludes it would be "challenging" to solve the problem. He also favors a new school board election this year, not in 2018 as is proposed in the house plan. And he backs state oversight of the state dollars that would flow into the schools, if lawmakers make a deal before the July 1 deadline.

Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) said yesterday that the Federal Reserve should use its authority to extend aid to Puerto Rico to help the island with its $70 billion debt crisis, MorningConsult.com reported. Sanders called for the Fed to use authority it has under Section 13.3 of the Federal Reserve Act to give aid to entities outside the banking system in “unusual and exigent circumstances.” He compared possible Fed assistance to the central bank’s role in extending aid to large banks during the 2008 financial crisis. “If the Fed could bail out Wall Street, it can help the three-and-a-half million American citizens of Puerto Rico,” he said. He also criticized the emerging plan in Congress to give Puerto Rico debt restructuring authority by establishing a fiscal oversight board. “The Republican plan in Congress to establish an unelected oversight board that would be given the power to slash pensions, cut education and healthcare and increase taxes on working families is not the answer,” Sanders (I-Vt.) said. Read more.

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

U.S. House of Representatives Speaker Paul Ryan said on Friday that an updated bill dealing with Puerto Rico's debt will be introduced in "the coming days,” Reuters reported. "Right now, we are working with the Natural Resources committee, the administration, and our Democratic counterparts to iron out the final constitutional and legal questions surrounding the legislation," Ryan said. "Let me be clear: There will be no taxpayer bailout of Puerto Rico,” he added. Read more. 

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

House Democrats are taking issue with potential provisions in a forthcoming Puerto Rico bill that could impact debt restructuring, the island’s minimum wage and ownership of land on the Caribbean island Vieques, according to Minority Leader Nancy Pelosi (D-Calif.), MorningConsult.com reported yesterday. “It’s an issue of what will work in terms of restructuring, how the makeup and the scope of the board is in furtherance of having the restructuring work,” said Pelosi. “Issues that relate to language about pensions, and minimum wage, et cetera are also part of that discussion. And the Vieques issue is there, but that doesn’t relate to the restructuring.” Separately, on a call with reporters, Rep. Raul Grijalva of Arizona, the top Democrat on the House Natural Resources Committee, said that Democrats haven’t been presented with a copy of the new legislation. Democrats have raised concerns about provisions in the current Puerto Rico bill, H.R. 4900, that would give the commonwealth’s government the authority to lower the minimum wage to as low as $4.25 an hour. They’ve also criticized a provision in that measure that would authorize the transfer of federal land on Vieques, and they’re pushing for new language that they say would avoid leading to commercial exploitation of the land. Read more. 

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

The financial problems of Hartford, Conn. are deep-seated, from high taxes and exorbitant living costs to widespread unemployment and rampant poverty, according to a commentary yesterday in the City-Journal. About a third of the city’s residents live below the poverty line. Wallethub.com recently rated it the worst capital city in America. In late March, Hartford’s Democratic mayor Luke Bronin asked Connecticut state lawmakers for relief from the strictures of binding arbitration. Bronin, only a few months into his first term, was trying to avoid taking Connecticut’s capital city into bankruptcy. He came before the state’s Finance, Revenue, and Bonding Committee to testify on behalf of a bill that would have created a “financial sustainability commission” for the struggling city. Made up of business, labor, and administration officials, the commission would have had the power to act as final arbitrator if the city and its unions disagreed during contract negotiations. Unfortunately for Bronin, the bill didn’t make it out of committee — lawmakers told the mayor to find more savings in the city’s budget before looking to the state for help.

The Supreme Court is due to rule by the end of June on the validity of a Puerto Rico law that would allow the U.S. territory to restructure the chunk of its debt issued by public agencies, more than $20 billion, in a bankruptcy-like process, Reuters reported today. The court fight is playing out as the Republican-led Congress grapples with legislation that lawmakers hope will prevent the need for a bailout of the territory of 3.5 million U.S. citizens. The legislation is expected to put Puerto Rico's finances under federal oversight through a control board and let the Caribbean island cut debt through a bankruptcy-like restructuring process. It would preempt the Recovery Act, the local restructuring law that was thrown out in U.S. courts before Puerto Rico asked the Supreme Court to reinstate it. Puerto Rico is not covered by federal bankruptcy laws that U.S. cities and public agencies can use, so some U.S. lawmakers view legislation as the only way to keep the debt crisis from worsening. But drafting the bill has been laborious. Some bondholders, including U.S. hedge funds, and Republicans are seeking to ensure that creditors get paid as much as possible of what they are owed. Congressional Democrats, the Obama administration and Puerto Rico itself are trying to prevent austerity that could threaten services on the island. An early draft of the bill by the House of Representatives Natural Resources Committee never made it to a vote, and the panel on Wednesday delayed unveiling the latest draft, citing the need for "a number of refinements." Some Republicans oppose inclusion of a "cram-down" provision that would let Puerto Rico impose debt cuts on creditors who do not agree to them. If the Supreme Court reinstates the Recovery Act, the congressional legislation might not seem so bad to creditors in comparison, said ABI Resident Scholar Prof. Melissa Jacoby of the University of North Carolina School of Law. "It might alter the lobbying landscape," Jacoby said. Puerto Rico has already defaulted on some of its debt, most recently the bulk of a $422 million payment owed by its primary government bank. Read more. 

Experts talk about the next steps for Puerto Rico to resolve its financial distress today at ABI’s New York City Bankruptcy Conference. Walk-up registration available! 

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