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Congress has scheduled yet another hearing on the debt crisis slowly destroying the lives of millions of American citizens living in Puerto Rico. If this results in prompt legislative action, we should applaud the exercise of strong, even if belated, leadership, according to a commentary by Prof. John Pottow in The Hill yesterday. If this results only in more platitudes on a vague need for “structural reform,” then we should notch another failure of our congressional representatives to solve actual problems where real people suffer, according to the commentary. Congress’s inability to act on this burgeoning crisis is especially surprising given the near-unanimous and bipartisan chorus of scholars, disinterested investment professionals, and politicians who have advocated such simple changes as amending the Bankruptcy Code. Heavy hitters ranging from Sen. Bernie Sanders (I-Vt.) to Grover Norquist and Newt Gingrich all agree that bankruptcy reform, such as the Puerto Rico Chapter 9 Uniformity Act currently pending, needs swift passage. Read more. 

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

Prices of Puerto Rico bonds suggest that investors are circumspect when its comes to possible progress in a debt exchange of the island’s securities and focusing on whether the commonwealth makes good on $711 million of principal and interest payments coming due, Bloomberg News reported yesterday. “They’re waiting to see what the commonwealth does from here,” said Daniel Hanson, an analyst at Height Securities, a Washington, D.C.-based broker dealer. “They really want Puerto Rico to show some good will by paying bonds over the next six weeks.” Commonwealth general obligations maturing July 2035, the most-actively traded uninsured Puerto Rico bond in the past three months by volume, changed hands yesterday at an average of 71.3 cents on the dollar, compared with 71.7 cents on Friday, data compiled by Bloomberg show. Read more. 

For more information on Puerto Rico’s debt crisis, be sure to view ABI’s “Puerto Rico in Distress” webpage. 

Puerto Rico's Government Development Bank (GDB) on Friday presented some of the island's creditors with more details on a forthcoming plan to consolidate their bonds into a single bond exchange, in a meeting the GDB's president called "very positive and productive,” Reuters reported on Friday. GDB has said it plans to offer creditors a universal debt exchange, or "superbond," which in essence would allow bondholders across several Puerto Rican credits to exchange their debt for a single new bond. But with existing bonds backed by different revenue streams from the various issuing authorities, such as the GDB itself and Puerto Rican sales tax authority COFINA, GDB president Melba Acosta said revenue streams might be consolidated to support the new bond. "If we have different credits that have different repayment sources...there will most probably be a consolidation of repayment sources," Acosta said. The meeting comes ahead of a Dec. 1 hearing about Puerto Rico before the U.S. Senate Judiciary Committee, as Congressional Republicans mull whether to support legislation that could help Puerto Rico restructure its debt. Read more. 

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

Puerto Rico lawmakers approved a bill to establish a local fiscal adjustment board, a key measure in Governor Alejandro Garcia Padilla’s plan to lighten the island’s $70 billion debt burden, Bloomberg News reported yesterday. The bill now goes before the governor for approval. Details weren’t immediately available. Lawmakers haven’t acted yet on another bill to authorize a restructuring of the commonwealth’s main electric utility. Yesterday was the final day of the current legislative gathering, though Garcia Padilla can call a special session to require lawmakers to continue working on the measure. Read more.

In related news, Puerto Rico’s congressional representative yesterday blasted the idea of a federal board to oversee the territory’s troubled finances, saying it would amount to a “dictatorship,” The Hill reported today. Pedro Pierluisi (D), Puerto Rico’s nonvoting member of Congress, dismissed the idea floated in the Capitol as an unforgiveable breach on Puerto Rico’s autonomy, even as the territory turns to Congress for help steering through its unbearable debt load. Some Republicans, including Senate Judiciary Chairman Chuck Grassley (R-Iowa), have suggested a federal board similar to the one used in the District of Columbia during the 1990s could help the territory reconcile its troubled finances. “That would be a blatant exercise in colonialism like I haven’t seen in recent history,” he said Tuesday. “Whoever proposes that is going to be facing me, and facing anybody that believes in democracy in the world.” Click here to watch a video of the event that Rep. Pierluisi participated in yesterday titled “Puerto Rico’s Fiscal Future: What’s Next for America’s Largest Territory?”

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

Former Detroit Bankruptcy Judge Steven Rhodes said that Puerto Rico needs to be put on life support and the way to do it is through bankruptcy, Bond Buyer reported today. Rhodes also called for a central control person or board, preferably designated by the federal government, to spearhead the proceedings in place of the island's governor and legislature. He said Puerto Rico's struggles with unpayable bond debt and unfunded pension liabilities closely resemble those of Detroit, where Michigan Gov. Rick Snyder appointed Kevyn Orr to serve as an emergency manager for the city throughout the bankruptcy process. "In Detroit, we contracted democracy to a significant extent. When it was over, we handed it back to [city officials] and told them it was their responsibility to make it work," Rhodes said. "That is what I advocate for Puerto Rico." Read more. 

Judge Rhodes is one of the speakers participating in The Hill’s policy discussion this morning titled “Puerto Rico’s Fiscal Future: What’s Next for America’s Largest Territory?”

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

The city's balloon payment due in 2024 for its two pension funds has risen to $195 million, or about 71 percent above the original $114 million projected under the city’s bankruptcy exit plan approved by a federal judge last year, the Detroit Free Press reported today. The unexpected jump could challenge funding behind the city's financial road map approved as part of the nation's largest municipal bankruptcy. Actuaries for the city's two pensions funds say that the lower estimate used in the bankruptcy plan was based on outdated information, including projections that didn't allow for the longer life expectancy of retirees or that the city would be hiring new employees after filing for bankruptcy who would need to become part of the pension system.

Puerto Rico’s main electricity provider extended an agreement with some bondholders to Nov. 20, giving the utility more time to negotiate with insurers that guarantee a portion of its debt against default, Bloomberg News reported on Friday. The Puerto Rico Electric Power Authority (PREPA) is trying to restructure $8.2 billion of debt to reduce its costs and free up cash for plant upgrades. Investors holding about 35 percent of its debt on Nov. 5 agreed to take losses of as much as 15 percent by exchanging their bonds for new securities. The deal was set to lapse Thursday if PREPA couldn’t win the support from companies that insure about $2.5 billion of the utility’s debt. The new deadline is Nov. 20, PREPA said in a statement. Read more. 

In related news, New York City’s $53 billion civil-employees’ pension is urging its hedge funds and distressed debt managers that hold Puerto Rico bonds to “find a just and equitable solution” to the commonwealth’s debt crisis, Bloomberg News reported on Friday. The New York City Employees’ Retirement System has assets managed by at least eight money managers that own pieces of the island’s $70 billion debt. As prices of Puerto Rico bonds plummeted and yields soared, hedge fund and distressed-debt buyers swooped in. They now hold as much as 30 percent of Puerto Rico’s securities, according to Barclays Plc. “Some hedge fund and other institutional investors’ reaction to the crisis suggests they will seek to impose draconian terms and conditions on Puerto Rico’s bond issuing entities,” according to a letter sent by the trustees of the New York City Employees’ Retirement System, one of the city’s five pension funds. Read more. 

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