Puerto Rico

COMMENTARY: PUERTO RICO DOESN'T HAVE THE MONEY

When Alejandro García Padilla, the governor of Puerto Rico, announced on June 29th that the territory's $72 billion public debt was unsustainable, he warned that the only alternative to a comprehensive restructuring "would be the unilateral and unplanned non-payment of obligations," according to a commentary today in The Economist. García Padilla was presumably hoping to intimidate Puerto Rico's recalcitrant creditors into accepting their inevitable losses, thus averting disaster. Just a month later, the worst-case scenario has started to become a reality, according to the commentary. Puerto Rico's Public Finance Corporation (PFC), a government agency, yesterday was scheduled to transfer $58 million to its bondholders. However, the PFC depends on the island's legislature to appropriate funds for its debt service. And its lawmakers had conspicuously failed to do so, according to the commentary, for one simple reason: in the words of Víctor Suárez, the governor’s chief of staff, "We don’t have the money." As a result, the PFC only managed to send off a token $628,000. The market's enforcers did not hesitate to render their judgment: as soon as the business day ended, the rating agency Moody's announced that it considered the security in default. Read the full commentary.

The August ABI Journal features an exclusive commentary from Puerto Rico's representative in Congress, Resident Commissioner Pedro R. Pierluisi. He outlines Puerto Rico's problems and how his legislation, H.R. 870, works to address them by authorizing chapter 9 for the territory. Click here to read the commentary in the August ABI Journal.

LENDERS PITCH REFINANCED LOANS TO SELECT GRADUATES

More student lenders are for the first time offering to refinance the loans of professionals who are years out of college, promising low rates in return for the prospect of lucrative new customers, the Wall Street Journal reported on Friday. A growing number of lenders have started refinancing the debt of select graduates with high credit scores and, often, high-paying jobs. Five lenders who jumped into the business staring in 2012 have already refinanced about $5 billion in loans, while Goldman Sachs Group Inc. estimates $200 billion of student loans could be eligible for refinancing. Lenders looking at growth in the business see an opportunity to snatch customers from large banks and the federal government. They also are betting that helping customers save money in their 20s or 30s will allow them to "cross-sell" investment advice or other services later. Nearly 93 percent of outstanding student-loan balances are made up of federal loans, which remain the cheapest loan option for many student borrowers. Federal student loans were created decades ago to promote economic mobility, and they charge the same interest rate regardless of the borrowers' income or credit score. Historically, refinancing for a lower rate was generally limited to the small slice of the market handled by private lenders. But in recent years, companies such as Social Finance Inc. have been refinancing both private and federal loans. Read more. (Subscription required.)

CONSUMER DEMAND GROWS FOR CREDIT PRODUCTS

The Federal Reserve's latest survey of senior loan officers released yesterday showed that consumer demand for home, auto and credit card loans appears to be growing, the Wall Street Journal reported today. Most banks said they hadn't changed the standards or terms of their consumer loans during the three months ended in July. A few of the large banks, however, reported they had eased their standards for credit card loans. As well, a few large banks reported that they had increased credit limits and reduced minimum credit scores to open accounts. This confirms the push to expand credit cards that was apparent in big banks’ second-quarter earnings. Bank of America, for one, said it had issued 1.3 million cards, its biggest quarterly tally since 2008. Wells Fargo and JPMorgan Chase also reported a rise in credit card activity. Citigroup indicated that it is looking to follow up on its deal to issue Costco's private-label credit cards by purchasing more card portfolios. As of June, the ratio of credit card and other revolving debt issued by the big banks to personal consumption expenditures was just around its post-recession average, according to Federal Reserve data. Meanwhile, delinquency rates remain extremely low. Read more. (Subscription required.)

U.S. DISTRICT JUDGE REJECTS AMERICAN EXPRESS CLASS ACTION SETTLEMENT

U.S. District Judge Nicholas Garaufis today rejected a proposed class action settlement between American Express Co. and merchants who sued the company over swipe fees, ruling that a lawyer for the merchants compromised the fairness of the agreement, Reuters reported. Judge Garaufis ruled that lawyer Gary Friedman acted improperly by talking about the case and sharing confidential information with a friend who represented MasterCard Inc. in a parallel class action against MasterCard and Visa Inc. Garaufis wrote that Friedman repeatedly violated court rules meant to protect confidential information and created a conflict of interest. The violations were so blatant that in at least two emails, Friedman wrote to his friend, "burn after reading." Judge Garaufis ordered Friedman removed as co-lead counsel for the merchants and ordered a new round of written briefs to be filed in the case by Sept. 8. Read more.

ABI WANTS TO SEE YOU IN PHOENIX THIS DECEMBER FOR THE WINTER LEADERSHIP CONFERENCE!

Join ABI on Dec. 3-5, 2015, at the historic Arizona Biltmore in downtown Phoenix for the 27th Annual Winter Leadership Conference. This can’t-miss event is always a member favorite and this year will be no exception! There will be topics designed for consumer and business practitioners, as well as financial advisors. Earn up to 12/14 hours of CLE/CPE credit and 2.75/3 hours of ethics, and enjoy a plethora of social and networking events.

Highlights from the conference include:

• Optional events, including a golf tournament, kayaking, tennis, horseback riding and much more
• Great Debates on chapter 11 plans, whether a bankruptcy judge can disband a creditors’ committee and must a creditor file a proof of claim
• BAPCPA Consumer Issues: 10-Year Anniversary Special
• Nine joint committee sessions, provided by ABI's 18 committees
• A live Bloomberg "Eye on Bankruptcy" luncheon presentation
• A special Casino Night!
• A judges’ roundtable on hot-button issues

Early-bird registration ends Oct. 2 so be sure to register to take advantage of the savings!

ATTENDING AN ABI CONFERENCE? MAXIMIZE YOUR EXPERIENCE WITH THE OFFICIAL ABI EVENTS APP!

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- View a complete listing of ABI events
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ABI thanks Donlin, Recano & Co. for its generous sponsorship of the ABI Events app.

ON-DEMAND VIDEO COURSE HELPS YOU PREPARE FOR THE ABC BOARD CERTIFICATION TEST!

Achieving American Board Certification (ABC) means you have met the rigorous, objective standards of a top professional in the areas of bankruptcy and/or creditors' rights. The ABC Exam is the essential step in this process, and this 5-part on-demand course will prepare you for the test. This intro video explains the benefits of ABC certification, the steps in the process and what to expect in the exam. The full exam prep course will qualify for 6 hours of CLE credit (where permitted for online learning), including 1 hour of ethics. The course is $295 for ABI members; $395 for non-members. The non-member $395 fee also includes 1 year of ABI Membership (a $295 value). Click here for more information and to purchase the course.
 

NEW CASE SUMMARY ON VOLO: BRUMFIEL V. U.S. BANK, ET AL. (10TH CIR.)

Summarized by Brandon Bickle of GableGotwals

Applying de novo review, the Tenth Circuit concluded that the debtor's claims for injunctive relief were moot because U.S. Bank was no longer pursuing its non-judicial Rule 120 procedure, and the debtor's claims for money damages were property of her bankruptcy estate pursuant to 11 U.S.C. s. 541.

There are more than 1,800 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.

NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: DEFAULT RATE FOR U.S. MINING COMPANIES JUMPS TO HIGHEST IN MORE THAN FIVE YEARS

The debt hole for U.S. miners is deepening, according to a recent blog post, as coal producer Alpha Natural Resources Inc.’s chapter 11 bankruptcy filing yesterday helped push a measure of financial woe among U.S. miners to its highest level in more than five years. The trailing-year default rate for U.S. metals and mining companies tracked by Fitch Ratings surged to 10 percent from July’s 7 percent, the highest reading since at least the start of 2010, according to the firm.

For more, be sure to check out today's Chart of the Day.

To read more on this blog and all others on the ABI Blog Exchange, please click here.

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INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 23 member associations worldwide with more than 9,800 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

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2015

August
- Mid-Atlantic Bankruptcy Workshop
Aug. 6-8, 2015 | Hershey, Pa.

September
- Southwest Bankruptcy Conference
Sept. 10-12, 2015 | Las Vegas, Nev.
- Lawrence P. King & Charles Seligson Workshop on Bankruptcy and Business Reorganization
Sept. 16-17, 2015 | New York, N.Y.

October
- Views from the Bench Conference
Oct. 9, 2015 | Washington, D.C.
- 7th Circuit Consumer Bankruptcy Conference
Oct. 12, 2015 | Chicago, Ill.
 

- Midwestern Bankruptcy Institute
Oct. 15-16, 2015 | Kansas City, Mo.

November
- Corporate Restructuring Competition
Nov. 5-6, 2015 | Philadelphia, Pa.
- Complex Financial Restructuring Program
Nov. 5, 2015 | Philadelphia, Pa.
- Detroit Consumer Bankruptcy Conference
Nov. 11, 2015 | Detroit, Mich.

December
- Winter Leadership Conference
Dec. 3-5, 2015 | Phoenix, Ariz.
- ABI/St. John’s Bankruptcy Mediation Training Program
Dec. 6-10, 2015 | New York, N.Y.

ANALYSIS: PREPA WEIGHS HEAVILY ON SOLUTIONS TO PUERTO RICO'S DEBT CRISIS

PREPA, Puerto Rico's government-owned electric utility, has $9 billion in debt, electricity rates that run 2 1/2 times the national average and aging power plants that lack pollution controls and violate Environmental Protection Agency mercury limits, according to a Washington Post analysis on Sunday. The utility lies at the epicenter of a mounting financial crisis in Puerto Rico, as the territory's governor recently called the island’s $73 billion of debts "unpayable." A report issued by three veteran International Monetary Fund economists said that the utility’s poor performance not only ruined its own balance sheet but also undermined the Puerto Rican economy's competitiveness because of needlessly high electricity rates. "As a key input cost, this cascades down to locally produced goods and services and stunts potential growth sectors such as tourism," the report said. Three-quarters of the utility’s trucks are "obsolete" and frequently out of service, according to a presentation by Lisa J. Donahue, a managing director of New York-based AlixPartners who is now acting as the utility’s restructuring officer. Donahue has vowed to fix the trucks and shrink the bloated payroll, which is twice as big as the average utility payroll on the mainland, according to a June 2010 report by the Center for a New Economy. Read more.

The August ABI Journal features an exclusive commentary from Puerto Rico's representative in Congress, Resident Commissioner Pedro R. Pierluisi. He outlines Puerto Rico's problems and how his legislation, H.R. 870, works to address them by authorizing chapter 9 for the territory. Thursday's Bankruptcy Brief will have an excerpt of Pierluisi's commentary.

A related commentary on CNBC.com today said that as Puerto Rico is now pursuing a voluntary debt restructuring, it especially wants access to chapter 9 to address any potential holdouts. However, several Republicans in the GOP-controlled Congress view extending chapter 9 in this instance as tantamount to a "bailout," a concept that does not sit well in Washington these days, particularly among conservatives. Holders of debt in Puerto Rican public agencies, like the Puerto Rico Electric Power Authority (PREPA), have vehemently argued that giving PREPA and other such island organizations chapter 9 protection would be tantamount to changing the rules in the middle of the game, and condoning past fiscal profligacy. Moreover, members of Congress and presidential candidates seizing on the issue for political gain threaten to give Puerto Rico's chapter 9 a partisan tinge, making it more difficult to attract sufficient bipartisan support, according to the commentary. Read the full commentary.

SEC POISED TO COMPLETE CEO PAY-RATIO RULE

Regulators are poised to complete a rule requiring companies to disclose the pay gap between chief executives and employees, putting in place a measure without broad exclusions sought by companies, the Wall Street Journal reported today. The Securities and Exchange Commission is expected to allow companies to exclude 5 percent of their overseas workers from the pay-ratio calculation. Companies had pressed to exclude a much larger percentage of foreign workers, which likely would have narrowed the pay gap that some businesses report. Under the rule, which the SEC could vote on as early as the first week of August, companies would have to disclose median worker pay -- the point on the income scale at which half their employees earn more and half earn less -- and compare it with CEO compensation. A mandate of the 2010 Dodd-Frank financial law, the pay-ratio rule could put added pressure on corporate boards to slow pay increases for chief executives at companies with significant or growing gaps, proponents have said. SEC Chairman Mary Jo White is under pressure from Sen. Elizabeth Warren (D-Mass.) and other Democratic lawmakers to complete the measure, as well as other unfinished portions of the Dodd-Frank law. Read more. (Subscription required.)

In related news, the House Financial Services Committee held a hearing today titled, "The Dodd-Frank Act Five Years Later: Are We More Prosperous?" Click here to read the prepared witness testimony.

FED OFFICIALS MAY OFFER MORE CLARITY ON RATES

Federal Reserve officials are likely to emerge from their policy meeting tomorrow with short-term interest rates still pinned near zero, though they could send fresh hints that they're getting closer to raising rates, the Wall Street Journal reported yesterday. Fed Chairwoman Janet Yellen emphasized in congressional testimony earlier this month that she expects the central bank to start lifting its benchmark federal-funds rate at some point before year's end. Her comments and other recent public statements by Fed officials have made clear that July is too soon. Although the economy is growing moderately after contracting in the first quarter and employers are hiring at a solid pace, inflation remains stubbornly below the Fed's two percent target and officials want to be more confident that it is going to rise before acting. Read more. (Subscription required.)

U.S. CONSUMER CONFIDENCE FALLS BACK SHARPLY IN JULY

Consumers unexpectedly took a dimmer view of the U.S. economy this month, as the Conference Board, a private research group, said today that its index of consumer confidence plunged to 90.9 in July from a revised 99.8 in June, the Wall Street Journal reported today. Consumer expectations for economic activity over the next six months plunged to 79.9 from a revised 92.8, originally reported as 94.6. The board's survey found that 20.7 percent of consumers this month think jobs are "plentiful," versus 21.3 percent who thought that in June. The share of respondents anticipating more jobs in the next six months fell to 13.1 percent in July from 17.1 percent in June. The share expecting fewer jobs jumped to 20.0 percent from 15.2 percent. Read more. (Subscription required.)

NEXT TUESDAY: ABI WORKSHOP TO FEATURE BANKRUPTCY JUDGES EXAMINING COMMISSION RECOMMENDATIONS ON RESOLVING COURT SPLITS

Which Chapter 11 Reform Commission recommendations are most likely to be well received by judges? The 2015 Bankruptcy Judges Roundtable, an ABI Workshop, will take place at ABI headquarters on Aug. 4 to examine the Chapter 11 Reform Commission's recommendations on resolving court splits. The Commission identified more than 30 splits in case law on important bankruptcy issues. Attend the program from 3:00-4:30 p.m. ET in person or via live webstream to hear five bankruptcy judges discuss the recommendations and issues surrounding the court splits. Speakers on the program are Bankruptcy Judges Dennis R. Dow (D. Mo.), Bruce A. Harwood (D. N.H.), Barbara J. Houser (N.D. Texas), C. Ray Mullins (N.D. Ga.) and Eugene R. Wedoff (N.D. Ill.). ABI will seek 1.5 hours of general CLE credit in 60-minute-hour states and 1.5 hours of credit in 50-minute-hour states for the program. A networking reception will follow from 5-7 p.m. ET for in-person attendees, and registration for just the reception is also available. Click here to register.

ABI WANTS TO SEE YOU IN PHOENIX THIS DECEMBER FOR THE WINTER LEADERSHIP CONFERENCE!

Join ABI on Dec. 3-5, 2015, at the historic Arizona Biltmore in downtown Phoenix for the 27th Annual Winter Leadership Conference. This can’t-miss event is always a member favorite, and this year will be no exception! There will be topics designed for consumer and business practitioners, as well as financial advisors. Earn up to 12/14 hours of CLE/CPE credit and 2.75/3 hours of ethics, and enjoy a plethora of social and networking events.

Highlights from the conference include:

• Optional events, including a golf tournament, kayaking, tennis, horseback riding and much more
• Great Debates on chapter 11 plans, whether a bankruptcy judge can disband a creditors’ committee and must a creditor file a proof of claim
• BAPCPA Consumer Issues: 10-Year Anniversary Special
• Nine joint committee sessions, provided by ABI’s 18 committees
• A live Bloomberg “Eye on Bankruptcy” luncheon presentation
• A special Casino Night!
• A judges’ roundtable on hot-button issues

Early-bird registration ends Oct. 2, so be sure to register to take advantage of the savings!

NEW CASE SUMMARY ON VOLO: GREEN POINT CREDIT LLC V. MCLEAN (IN RE MCLEAN; 11TH CIR.)

Summarized by Kathleen DiSanto of Jennis & Bowen, P.L.

The Eleventh Circuit concluded that Green Point Credit, LLC and Green Tree Servicing, LLC (collectively, "Green Tree") violated the discharge injunction by filing a proof of claim in the debtors' chapter 13 bankruptcy case in an effort to collect a debt that was discharged in their prior chapter 7 case, but vacated the monetary sanctions awarded by the bankruptcy court and affirmed by the district court and remanded to the district court with instruction to vacate and remand to the bankruptcy court.

There are more than 1,800 appellate opinions summarized on Volo, and summaries typically appear within 24 hours of the ruling. Click here regularly to view the latest case summaries on ABI's Volo website.

NEW ON ABI'S BANKRUPTCY BLOG EXCHANGE: SDNY SIDES WITH FIFTH CIRCUIT AND THE UNCITRAL MODEL LAW WHEN GRANTING RECOGNITION TO OAS

A recent blog post examined the U.S. Bankruptcy Court for the Southern District of New York's decision on July 13 in In re OAS S.A. et al. that recognized, as foreign main proceedings, three Brazilian bankruptcy proceedings currently pending for The OAS Group ("OAS") -- a Brazilian construction and engineering enterprise. To read more on this blog and all others on the ABI Blog Exchange, please click here.

For more on chapter 15 recognition and analysis of the UNCITRAL Model Law, be sure to pick up a copy of ABI’s Chapter 15 for Foreign Debtors.

ATTENDING AN ABI CONFERENCE? MAXIMIZE YOUR EXPERIENCE WITH THE OFFICIAL ABI EVENTS APP!

With this interactive mobile app, you can:

- View a complete listing of ABI events
- View the full schedule for specific ABI conferences, including all educational sessions and networking and optional events
- Access conference educational materials
- Access maps of meeting spaces and get information about the hotels and host cities
- View ABI conference exhibitors and sponsors
- Create your own profile, message other conference attendees, post photos and view up-to-the-minute schedule changes for ABI conferences
- Access information from previous ABI conferences

Everything you need to attend ABI events is a few taps away: Download the ABI Events app today!

- iOS: https://goo.gl/mVO5JG
- Android: https://goo.gl/CJyLaL

ABI thanks Donlin, Recano & Co. for its generous sponsorship of the ABI Events app.

INSOL INTERNATIONAL

INSOL International is a worldwide federation of national associations for accountants and lawyers who specialize in turnaround and insolvency. There are currently 23 member associations worldwide with more than 9,800 professionals participating as members of INSOL International. As a member association of INSOL, ABI's members receive a discounted subscription rate. See ABI's enrollment page for details.

Have a Twitter, Facebook or LinkedIn Account?

Join our networks to expand yours.

2015

August
- Mid-Atlantic Bankruptcy Workshop
Aug. 6-8, 2015 | Hershey, Pa.
- ABI Workshop: Bankruptcy Judges Roundtable
Aug. 4, 2015 | Alexandria, Va.

September
- Southwest Bankruptcy Conference
Sept. 10-12, 2015 | Las Vegas, Nev.
- Lawrence P. King & Charles Seligson Workshop on Bankruptcy and Business Reorganization
Sept. 16-17, 2015 | New York, N.Y.

October
- Views from the Bench Conference
Oct. 9, 2015 | Washington, D.C.
- 7th Circuit Consumer Bankruptcy Conference
Oct. 12, 2015 | Chicago, Ill.
 

- Midwestern Bankruptcy Institute
Oct. 15-16, 2015 | Kansas City, Mo.

November
- Corporate Restructuring Competition
Nov. 5-6, 2015 | Philadelphia, Pa.
- Complex Financial Restructuring Program
Nov. 5, 2015 | Philadelphia, Pa.
- Detroit Consumer Bankruptcy Conference
Nov. 11, 2015 | Detroit, Mich.

December
- Winter Leadership Conference
Dec. 3-5, 2015 | Phoenix, Ariz.
- ABI/St. John’s Bankruptcy Mediation Training Program
Dec. 6-10, 2015 | New York, N.Y.