Michigan Governor Rick Snyder said on Monday that Detroit's public schools should be split between a new community school district and the current district to raise academic performance and avoid financial collapse, Reuters reported yesterday. The new district would be responsible for operations, while the current district would be charged with eliminating a budget deficit. The Republican governor warned that without his plan, which he expects to be introduced in the state legislature this month, the school system risked succumbing to a financial crisis that would not necessarily lead to bankruptcy, but could result in a debt default that would have repercussions for the state and its other school districts. The city of Detroit shed about $7 billion of its $18 billion of debt and obligations when it exited the biggest-ever U.S. municipal bankruptcy last December, but the city's school district has been unable to shake off a state-declared financial emergency dating back to 2008.
Puerto Rico legislators are warning that they will seek amendments to a bill that would create an independent fiscal control board as the U.S. territory pushes to restructure a portion of its $72 billion of public debt before the government runs out of money, the Associated Press reported yesterday. The territory’s lawmakers said on Monday that they expect to hold five days of public hearings before voting on the 71-page measure, submitted late last week. Most of the debate will likely focus on what kind of power and reach the board should have as concerns grow about whether the government would lose significant control over its finances and operations. "This project is an admission that the markets and U.S. institutions have absolutely no confidence in this government," said Sen. Maria de Lourdes Santiago. "This board would not supervise. It would govern." The proposed board is part of a five-year fiscal reform plan aimed at strengthening the island's economy, which has tanked for nearly a decade amid concern that public agencies might soon go bankrupt. Read more.
The Senate Energy and Natural Resources Committee will hold a hearing on Thursday at 10 a.m. ET to receive testimony on Puerto Rico's economy, debt, and options for Congress moving forward. Read more.
For the latest news and analysis of Puerto Rico’s financial crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage.
A group of investors that hold the bonds of Puerto Rico’s water utility have hired investment bank Greenhill & Co. to help negotiate terms for new financing, Bloomberg News reported yesterday. The investors have discussed a plan that would create new senior debt for the Puerto Rico Aqueduct & Sewer Authority that is given higher priority than other agency borrowings. The bondholders may use a partial debt restructuring as a condition for backing the deal. The investors are seeking to inject fresh capital into the struggling water utility, known by the Spanish acronym Prasa, because it failed to sell $750 million of bonds with an average interest rate of 10 percent in August and September. Read more.
The Senate Energy and Natural Resources Committee will hold a hearing on Thursday at 10 a.m. ET to receive testimony on Puerto Rico's economy, debt, and options for Congress moving forward. Read more.
For the latest news and analysis of Puerto Rico’s financial crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage.
The Senate Energy and Natural Resources Committee will hold a hearing on Thursday at 10 a.m. ET to receive testimony on Puerto Rico's economy, debt, and options for Congress moving forward. More information on witnesses and prepared testimony forthcoming.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" page.
Puerto Rico bond prices suggest that investors are doubtful of a proposal being floated that would have the U.S. Treasury assist the commonwealth in the restructuring of its debt, Bloomberg News reported yesterday. General obligations maturing July 2035, the most actively-traded Puerto Rico securities in the last three months and originally sold at 93 cents on the dollar, changed hands at an average price of 74.7 cents, little changed from Wednesday, data compiled by Bloomberg show. Trades of at least $1 million on taxable pension bonds maturing July 2038 show that the bonds changed hands Thursday at an average price of 30.5 cents, up from 25 cents on Tuesday, Bloomberg data show. “It’s still in its infancy, so you can’t get too excited about it as a bond investor,” said Gary Pollack, who manages $6 billion of municipal debt, including Puerto Rico bonds, as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. Puerto Rico and federal officials are discussing the possible issuance of new bonds administered by the Treasury to help restructure the commonwealth’s debt, with federal officials overseeing a portion of the island’s tax collections that would be used to repay the securities. Read more.
For the latest news and analysis on Puerto Rico's Debt Crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
Puerto Rico and U.S. officials are discussing the issuance of a “superbond” possibly administered by the U.S. Treasury Department that would help restructure the commonwealth’s $72 billion of debt, the Wall Street Journal reported today. Under the plan, the Treasury or a designated third party would administer an account holding at least some of the island’s tax collections. Funds in the account would be used to pay holders of the superbond, which would be issued to existing Puerto Rico bondholders in exchange for outstanding debt at a negotiated ratio. Investors would receive less debt, likely taking an effective “haircut” on the value of their holdings, but would have higher expectations for getting repaid. The proposal would mark an important change in Puerto Rico’s relationship with the U.S. government, which has resisted wading into the island’s debt morass. A superbond would need to clear high political hurdles in Washington, D.C., and Puerto Rico to become a reality. Discussions with bondholders over the size of any haircut could present further challenges to reaching a deal. Read more. (Subscription required.)
For the latest developments on Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage.
Legislation to create a financial control board for heavily indebted Puerto Rico will be filed on Thursday or Friday, the U.S. territory's government affairs secretary Jesus Manuel Ortiz said yesterday, Reuters reported. The financial control board, a key recommendation from a plan released in September to try and solve the U.S. territory's pressing debt problems, would have oversight over most government entities. Puerto Rico has seen its debt balloon to $72 billion, while the number of taxpayers shouldering the burden has dwindled, with thousands moving to the U.S. mainland each year. The U.S. territory defaulted on debt in August by paying only a fraction of what was due on some bonds. Read more.
In related news, for the second time in a month, a global bank with operations in Puerto Rico has agreed to pay millions of dollars to settle accusations that it violated industry rules when selling the island’s bonds to customers, the New York Times DealBook blog reported today. Santander Securities, a subsidiary of Banco Santander, will pay $4.3 million in restitution to clients on the island who lost money on Puerto Rican bonds, according to the Financial Industry Regulatory Authority (FINRA). FINRA also said that the brokerage unit would buy back Puerto Rican bonds from a limited group of customers who still hold them, and would pay a fine of $2 million for failing to properly supervise its employees. It estimated the total restitution and penalties to be $6.42 million. Read more.
For developments on Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage.
Creditors objected to elements of the city of San Bernardino's initial debt payment plan at a bankruptcy court hearing on Thursday, saying that the city was not being forthcoming about what assets it had and complaining about the lengthy process, Reuters reported on Friday. San Bernardino has proposed paying a penny on the dollar on nearly $50 million in pension obligation bonds held by EEPK, the Luxembourg-based bank and the city's second largest creditor behind the California Public Employee Retirement System. Representing EEPK at the hearing in Riverside, Calif., Vince Marriott said that the city had failed to reveal to creditors how much property it owned, its value, and whether it could be liquidated. Representing the city of San Bernardino, Paul Glassman said that the city would identify any excess properties but said the creditors were misguided if they thought there were great sums of money to be had through their sale.
Puerto Rico, at risk of running out of cash as soon as November, may be unable to pay investors as it looks to restructure $73 billion of debt, said Steven Rhodes, the former U.S. bankruptcy judge who is advising the island’s government, Bloomberg News reported on Friday. Puerto Rico faces a $354 million principal and interest payment on Dec. 1 for Government Development Bank debt, including securities that the commonwealth backs with its general-obligation guarantee, according to bond documents. Officials have said that the government may run out of cash in November unless it can get a short-term loan or renegotiate its debts. A $357 million interest payment on general-obligation bonds is due Jan. 1. Read more.
Stay up to date on Puerto Rico’s debt crisis with ABI’s “Puerto Rico in Distress” website.
