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Puerto Rico’s Government Development Bank, operating under a state of emergency to preserve cash, is about halfway toward reaching a forbearance agreement with creditors, Jesus Manuel Ortiz, a spokesman for Governor Alejandro Garcia Padilla, Bloomberg News reported on Saturday. The GDB, which lent to the commonwealth and its municipalities, owes $422 million on May 1 that officials have said the bank cannot pay. Barbara Morgan, a representative at SKDKnickerbocker in New York who represents the GDB, said that there is no agreement yet. The bank has filed with regulators to sell taxable debt that would mature in May 2017, according to the Municipal Securities Rulemaking Board’s website. Garcia Padilla on April 9 declared a state of emergency for the bank. That decision limits withdrawals from the GDB only to fund health, public safety and education services. The bank has $562 million of liquidity, according to a debt-moratorium law passed two weeks ago. Read more.

In related news, Moody’s Investors Service said that Puerto Rico will default in May on some of the $470 million it owes, Bloomberg News reported on Friday. The cash-strapped commonwealth is expected to fall short of paying $422 million to holders of bonds from the Government Development Bank, the credit rater said on Friday in a report. It may also default on debt from the Employees Retirement System, Industrial Development Co. and Highways and Transportation Authority because the GDB has just $562 million in liquidity as of April 1, Moody’s said. Moody’s expects Puerto Rico to pay the less than $3 million owed to holders of general-obligation bonds and securities guaranteed by the commonwealth’s constitution to “avoid the almost certain litigation that would quickly follow.” Sales-tax backed debt, known by the Spanish acronym Cofina, will pay with funds already deposited with the trustee. Appropriation debt from the Public Finance Corp., which accounts for 75 percent of all Puerto Rico defaults so far, will fail to pay yet again, Moody’s 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. 

House of Representatives Speaker Paul Ryan (R) said yesterday that very good progress was being made on a bill to help Puerto Rico tackle its $70 billion debt, but gave no timetable on when the legislation would be advanced, Reuters reported. "They're working with the Treasury on technical details on how restructuring works right now. I think they're making very good progress," said Ryan. He said he would leave the timing on advancing of the legislation to Rob Bishop, chairman of the House Natural Resources Committee.

Top Republican and Democratic House leadership staff are gathering with policy aides and Treasury Department officials to talk over next steps on the stalled Puerto Rico rescue bill, Politico reported today. The Hill meeting between the Obama Administration, House Natural Resources Committee and leadership staffers comes just days after a legislative package aimed at saving the Caribbean island from defaulting on its debt imploded because of conservative misgivings. The right flank of the House conservative conference has been spooked by the bill, after lobbying efforts and ads from creditors have labeled the bill a bailout — though it actually uses no taxpayer money. The bill’s backers say they’re going back to the drawing board to change the legislation to garner more support. Members of the Congressional Hispanic Caucus also plan to ask House Speaker Paul Ryan (R-Wis.) about the matter at a sit-down they previously had scheduled, in the hopes that Ryan will move quickly. Read more. 

In related news, Puerto Rico’s Government Development Bank (GDB), operating under a state of emergency imposed to halt an erosion of its dwindling cash, has filed with regulators to sell debt as officials negotiate with creditors about a $422 million payment owed at the start of May, Bloomberg News reported yesterday. The GDB, which lent to the commonwealth and its agencies, filed to sell taxable securities that would mature May 2017, according to the Municipal Securities Rulemaking Board’s website, called EMMA. The notice doesn’t list the amount of the sale or the coupon. The commonwealth hasn’t been able to sell debt since last year. Governor Alejandro Garcia Padilla declared the state of emergency April 9, allowing withdrawals from the GDB only to fund health, public safety and education services. The bank has $562 million of liquidity, according to a debt-moratorium law passed two weeks ago. 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 peak of Puerto Rico’s mountain of debt is obscured in the clouds of unaudited financial statements, but what we can see looks nearly impossible to scale, according to a commentary today by Rep. Bruce Westerman (R-Ark.) in the Washington Post. The island territory has a shrinking population of 3.6 million with a gross domestic product slightly over $100 billion, but is carrying $71 billion in debt with another $44 billion in unfunded pensions — equaling a debt of roughly $32,000 per person. Additionally, Puerto Rico’s labor participation rate is less than 40 percent. This means fewer taxpayers and a substantially higher debt load for wage earners. As bad as it sounds, it is still not even close to the United States debt load of $19 trillion spread among our 324 million citizens whom, if they were equally yoked, would each bear about $59,000 in debt.

Puerto Rico bondholders are lining up on different sides of the battle in Congress over legislation to rescue the island from financial collapse as lawmakers rewrite the bill in an effort to overcome opposition from Democrats and Republicans, Bloomberg News reported today. Hedge funds that own about $5 billion of Puerto Rico’s general-obligation bonds, which are guaranteed under the island’s constitution, are fighting the House measure that would give the U.S. territory ability to write off some of its $70 billion in debt. Firms that own securities backed by sales taxes are working to ensure its passage, seeing it as a way to protect their investment from a cascading series of defaults. Puerto Rico is veering toward major bond defaults in May and July after Governor Alejandro Garcia Padilla signed a law allowing him to suspend debt payments through January. He has pushed Congress to give his government legal powers to restructure debt in court, which it currently cannot do, to avert painful spending cuts on an island where nearly half the residents live in poverty and the economy has been contracting for a decade. Read more. 

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

Speaker Paul Ryan and top House Democrat Nancy Pelosi said Thursday they expect to be able to work out their differences on a bill to help address Puerto Rico’s debt crisis, but Ryan’s bigger challenge may be getting enough fellow Republicans to go along with the plan, Bloomberg News reported yesterday. Republicans acknowledge the island needs help from Congress to — in Ryan’s words — "bring order to the chaos" of a crisis over its $70 billion in debt, but many are skeptical of the draft issued by the House Natural Resources Committee. Republicans say that the curbs Democrats want to place on bondholders and creditors are too drastic. At the same time, Democrats complain that the oversight that Republicans want to enforce on Puerto Rico in return for relief is too harsh. Those positions were still playing out after the Natural Resources Committee unexpectedly cancelled a planned meeting Thursday to consider a draft bill, delaying action until next week at the earliest. The panel’s Republican chairman, Rob Bishop of Utah, indicated the measure didn’t have enough votes yet to reach the floor. 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 constantly shifting political dynamics underlying congressional efforts to help Puerto Rico resolve its financial crisis were still in flux yesterday, as the main lawmaker shepherding the measure through the House continued trying to persuade Republican members to get on board, according to MorningConsult.com. A vote scheduled for today in the House Natural Resources Committee was postponed as it became apparent that members still had questions about the evolving measure. After a brief committee session for members to submit opening statements, Chairman Rob Bishop (R-Utah) adjourned. Rep. Raul Grijalva (D-Ariz.), the committee’s ranking member, told reporters immediately after the meeting that the talks on the legislation are continuing. Both he and Resident Commissioner Pedro Pierluisi, Puerto Rico’s representative in Congress, hope the vote can take place next week. Earlier yesterday, Bishop huddled behind closed doors with members of the conservative Republican Study Committee after a hearing on the Puerto Rico issue. Several Republican members of the Natural Resources panel, some of whom sit on the Republican Study Committee, indicated they remained skeptical of the legislation. Read more. 

In related news, creditors of Puerto Rico's Government Development Bank yesterday withdrew a lawsuit that sought to prevent a run on the bank ahead of a $422 million debt payment due on May 1, Reuters reported. Hedge funds including Brigade Capital Management and Claren Road Asset Management, which hold some of GDB's $3.75 billion in debt, said that the lawsuit had no purpose now that Puerto Rico Governor Alejandro Garcia Padilla has declared a fiscal emergency at the bank. The emergency declaration, issued on Saturday, prevents GDB from lending and paying certain debts, and blocks depositors from withdrawing any money not required to fund essential services. This is essentially what the creditors had sought in their lawsuit, which was filed four days before Garcia Padilla's declaration. Read more. 

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

Legislation to help Puerto Rico restructure its $72 billion in debt was introduced in the House of Representatives yesterday, as members sought to address the island’s financial crisis quickly without setting a precedent that troubled states might try to follow, the New York Times reported today. The text of the bill showed numerous revisions written in by hand, suggesting that lawmakers had engaged in last-minute efforts to balance competing interests. For months, Democrats have been calling on Congress to help Puerto Rico, warning of a humanitarian crisis, while many Republicans have expressed discomfort over any measure that might be seen as a taxpayer bailout. The bill, which would give Puerto Rico certain powers that are normally available only in bankruptcy, is scheduled to be the subject of a hearing before the House Natural Resources Committee today and receive final amendments tomorrow before being sent for debate on the floor of the House next week. Rep. Sean P. Duffy (R-Wis.), who supported earlier efforts to give Puerto Rico direct access to chapter 9 municipal bankruptcy, introduced the bill yesterday. In particular, it would give the island the power to unilaterally discharge debt and to force creditors to accept settlements for less money than they were seeking. The bill also contains provisions meant to reassure Puerto Rico residents that Congress does not want to sideline their elected government during the coming debt negotiations. A previous draft of the bill would have created an oversight board with significant power over Puerto Rico’s economic affairs, such as raising taxes if necessary and repealing certain laws. Read more.

Link to H.R. 4900, the “Puerto Rico Oversight, Management, and Economic Stability Act” (PROMESA).

Click here for information on the House Natural Resources Committee hearing today at 10 a.m. ET titled “Legislative Hearing on a Discussion Draft of the "Puerto Rico Oversight, Management, and Economic Stability Act.”  

In related news, the island’s sole representative in Congress has seen his family wealth swell, thanks in part to Wall Street companies that have sought to capitalize on the island’s financial crisis and have hired his wife to advise them, the New York Times DealBook blog reported yesterday. The dual roles — those of a lawmaker and a spouse who are both involved in the financial affairs of their community — are hardly unusual in Washington, D.C. But legislation that Pedro R. Pierluisi (D), the resident commissioner to Congress from Puerto Rico, has introduced would benefit at least two of the companies that have hired his wife, María Elena Carrión, for financial advice. Carrión set up her own Puerto Rico-based financial advisory firm just 20 days after Pierluisi was elected to Congress in 2008, records show. Separately, a Wall Street hedge fund executive whose firm took part in a $3.5 billion bond sale in 2014 for Puerto Rico, has raised money for Pierluisi’s race for governor of Puerto Rico, campaign finance records and emails show. In separate interviews, both Pierluisi and Carrión said they kept their professional careers separate, and that nothing that Pierluisi had done in Congress had in any way been intended to benefit his wife’s start-up company, Multicultural Capital, or his bid for governor. House ethics rules place no limits on the work that a spouse of a lawmaker can do. Two ethics lawyers who examined the matter at the request of the Times said that they saw no violation of the rules based on the work that Carrión has done. Read more. 

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

Puerto Rico proposed a new plan yesterday to restructure its debt, offering some creditors better terms than an earlier plan but falling well short of winning broad support, the New York Times DealBook blog reported. The plan was announced as members of Congress in Washington, D.C., struggled with a momentous decision: whether and how to give Puerto Rico extraordinary powers to wipe out debt. Conservative Republicans have resisted this idea, but major defaults are looming. Last week lawmakers in Puerto Rico stepped up pressure on Congress to act quickly by suddenly authorizing the island’s governor to halt payments on $72 billion in debt. The new restructuring plan covers $49.3 billion of Puerto Rico’s total debt, most of which is in the form of municipal bonds. It calls for creditors to accept $32.6 billion to $37.4 billion up front by exchanging existing bonds for two new classes of bonds. The offer is up from a previous offer of $26.5 billion. Puerto Rico’s Government Development Bank, a crucial part of the local economy, risks defaulting on $422 million in debt payments due May 1, and the island faces $2 billion in payments on debt in July. Read more. 

In related news, the mutual-fund company with the biggest stake in Puerto Rico bonds that are almost certain to default on July 1 isn’t worried, Bloomberg News reported yesterday. That’s because Wells Capital Management’s $23 million position in the island’s general-obligation debt is entirely backed by units of bond insurers Assured Guaranty Ltd. and MBIA Inc., which agreed to pay investors if Puerto Rico doesn’t. That guarantee has distanced Wells Capital and other bondholders from a crisis that’s been rapidly unfolding over the past nine months and reached a new pitch last week, when Puerto Rico’s governor signed a law authorizing him to halt payments on much of its $70 billion of debt. As Puerto Rico veers toward a record-setting default, the insurers have created a haven for mutual funds and individuals who sold off much of the island’s uninsured bonds when their ratings were cut to junk, leaving hedge funds and distressed-debt buyers bearing the brunt of the impact. Assured, MBIA’s National Public Finance Guarantee Corp. and Ambac Financial Group Inc. guarantee $27 billion of the U.S. territory’s payments, a pledge that’s kept those bonds holding steady even as the prices of others tumbled. Read more.

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