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The Detroit Water and Sewerage Department is washing off the taint of its city’s notorious financial reputation as it refinances debt a year after emerging from the worst-municipal bankruptcy on record, Bloomberg News reported yesterday. The $324 million in tax-exempt revenue bonds sold through the Michigan Finance Authority on Wednesday were priced at a top yield of 3.71 percent for securities maturing in July 2035, according to preliminary data compiled by Bloomberg. That’s about 1 percentage point more than 20-year benchmark municipal bonds.

The U.S. Supreme Court may announce as soon as today whether it will hear an appeal by Puerto Rico to reinstate a law that would allow some island agencies to restructure their debts, Bloomberg News reported. The Court is scheduled to review Puerto Rico’s appeal during a private conference today, when it often issues a list of new cases. The disputed law would affect $22 billion of Puerto Rico’s $70 billion in debt. That includes $8.2 billion owed by the Puerto Rico Electric Power Authority, known as Prepa, which is negotiating with its creditors and would gain new leverage from a ruling upholding the law. The case centers on the power of the Puerto Rican government to fill what it says is a gap in federal bankruptcy law, which bars filings by the commonwealth’s agencies and municipalities. If the Supreme Court agrees to hear the case, it may hear arguments in March. The high court would rule by late June. Read more.

In related news, 10 Puerto Rico officials and local business people were indicted by a U.S. grand jury in connection with bribes made to win contracts from the island’s government, Bloomberg News reported yesterday. The charges were announced yesterday by U.S. Attorney Rosa Emilia Rodríguez-Vélez in Puerto Rico. They center on Anaudi Hernández Pérez, a political fund-raiser who prosecutors said exploited his ties to Governor Alejandro Garcia Padilla’s administration to recommend job candidates who went on to steer government contracts to his companies. Hernández Pérez’s co-conspirators include officials with the Puerto Rico Aqueduct and Sewer Authority, the workforce development agency and the island’s House of Representatives. Public officials were also treated to expensive meals and lavished with gifts including concert tickets, purses and help with their debts, according to prosecutors. Read more.

Join experts in San Juan to discuss Puerto Rico’s economic distress and other important cross-border insolvency topics at ABI’s Caribbean Insolvency Symposium on 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.

Detroit began filing lawsuits this week against dozens of vendors with the aim of recovering about $50 million in city payments made in the months before its historic bankruptcy filing, Reuters reported yesterday. Chuck Raimi, Detroit's deputy corporation counsel, said that 185 lawsuits are being filed in bankruptcy court against vendors that received "preferential" city payments on past-due bills during a 90-day period before Detroit's July 2013 bankruptcy filing. The city exited the biggest-ever U.S. municipal bankruptcy in December 2014, shedding about $7 billion of its $18 billion of debt and other obligations. Raimi said that the money is recoverable under the Code because the pre-bankruptcy payments to vendors resulted in higher recoveries than those obtained by other similarly situated creditors during the bankruptcy. He added that the city hopes to settle the cases, which were filed ahead of a Dec. 5 deadline imposed by the Code.

Puerto Rico said that it made all principal and interest payments due yesterday, averting a default on directly guaranteed bonds and allowing the commonwealth to continue talks with creditors to reduce its $70 billion debt burden, Bloomberg News reported yesterday. Governor Alejandro Garcia Padilla signed an executive order to permit the redirection of revenue budgeted for highway and convention center bonds and other agencies to pay for debt issued or guaranteed by the commonwealth, according to a Government Development Bank (GDB) statement. The GDB, which lends to the commonwealth and its agencies, had $354 million in principal and interest payments due yesterday. Garcia Padilla announced the clawback provision during a Senate hearing yesterday, where he received little support for his request to access bankruptcy to help right the commonwealth’s finances. The governor said that the island is running out of cash and will focus on providing essential services while in negotiations with creditors to accept losses on their holdings. It faces another big bond payment at the start of January. Read more.

To watch a replay of yesterday’s Senate Judiciary Committee hearing titled, “Puerto Rico’s Fiscal Problems: Examining the Source and Exploring the Solution,” please click here. 

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

The city of Detroit is on track with its sweeping restructuring and reinvestment plan rolled out almost one year ago when the city exited the nation's largest municipal bankruptcy, according to a new commission report, the Detroit Free Press reported today. In a biannual report to Gov. Rick Snyder, the Detroit Financial Review Commission concluded that the city has been in compliance with the plan in its first year by providing commission members with updated financial plans. The commission has reviewed and approved 237 city contracts and one collective bargaining agreement between the city's transportation department and a transit union. In addition, the city has amended its budget and issued new debt with the review and consent of the commission, according to the report.

Puerto Rico faces a moment of truth today, as the island owes a $355 million payment — a possible default which could trigger lawsuits, further spook investors and undermine the island's efforts to climb out of $72 billion in debt, Reuters reported today. The payment on bonds issued by the U.S. commonwealth's financing arm, the Government Development Bank (GDB), are crucial as Puerto Rico tries to stretch its liquidity into 2016 to give itself more time to restructure debt. A default is seen as possible but not definite. Governor Alejandro Garcia Padilla wants to overhaul spending and restructure debt, but bondholders are resisting cuts to repayments, and restructuring discussions look to take months. Read more. 

In related news, the Senate Judiciary Committee will hold a hearing at 10 a.m. ET today titled “Puerto Rico’s Fiscal Problems: Examining the Source and Exploring the Solution.” To view the hearing details, including the witness list, please click here. 

If anything stands as a symbol of how Puerto Rico ended up mired in billions of dollars of debt, it is an oceanside golf resort going to seed some 15 miles east of San Juan, the New York Times DealBook reported today. Known until this month as the Trump International Golf Club Puerto Rico, it was built as a for-profit venture, subsidized by federal taxpayers and backed by the island’s powerful Government Development Bank, which sold to investors and guaranteed repayment of more than $50 million in tax-exempt bonds. The resort went bankrupt this year and has since been sold, but the Government Development Bank is still making payments on the bonds that are outstanding; the last one is due in 2034. The deal and how it came to be provide telling insight into the workings of the Government Development Bank, which is responsible for managing the $72 billion in debt that the island has amassed — and says it cannot hope to repay. Although it has so far defaulted on only a tiny portion of the debt, the next test comes on Tuesday, when the bank is scheduled to make a $354 million bond payment. It will not yet say whether it can or should meet the deadline. Deals like the golf resort are not the only reason the Government Development Bank has found itself at the center of Puerto Rico’s financial jam. But it is an example of how the bank helped borrow on behalf of public and private enterprises over the years, then ended up with much of the debt, even when deals failed to fulfill their original purpose: the development of Puerto Rico. Read more. 

In related news, the Senate Judiciary Committee will hold a hearing tomorrow at 10 a.m. ET titled “Puerto Rico’s Fiscal Problems: Examining the Source and Exploring the Solution.” To view the hearing details, including the witness list, please click here.