Puerto Rico Governor Wanda Vazquez said a $787 million coronavirus relief package will include cash payments to nurses and police and vulnerable parts of the island’s economy, Bloomberg News reported. The island’s 170,000 self-employed workers will get cash payments of $500 apiece starting this week, while small businesses that have had to shutter operations will get $1,500 each. Nurses and ambulance workers will be eligible for bonuses of as much as $4,000; police and fire fighters for up to $3,500; and medical technicians’ payments set at as much as $2,500. The island is still working through a bankruptcy to restructure its massive debts, but it has moved swiftly to address the pandemic, which threatens to overwhelm its fragile health-care system. The federally-appointed board that oversees its finances approved the measures yesterday.
Puerto Rico’s debt restructuring faces a potential delay as the island’s oversight board plans to ask the court shepherding the commonwealth’s record bankruptcy to postpone hearings while the government works to address the coronavirus, Bloomberg News reported. Puerto Rico is seeking to reduce nearly $18 billion of debt tied to the commonwealth and fix a broke pension system that owes current and future employees $50 billion. The board in February filed a debt adjustment plan to the court and is now seeking to postpone hearings on that proposal, the board said in a statement on Saturday. Governor Wanda Vazquez on March 15 restricted the government to providing essential services and closed most businesses as a way to help decrease the spread of the disease. Island officials anticipate the virus will negatively impact the island’s economy during the next two quarters. A drop in Puerto Rico’s revenue collections might prompt a revision of the debt restructuring plan. The potential deal would cut Puerto Rico general obligations and debt guaranteed by the commonwealth and interest to $10.7 billion from $18.7 billion. The overall plan slashes debt and non-bond claims to $11 billion from $35 billion.
Puerto Rico’s main bankruptcy case could end in early November under a schedule approved by the federal judge overseeing the island’s record-setting debt restructuring, Bloomberg News reported. U.S. District Court Judge Laura Taylor Swain adopted the recommendations of a team of court mediators, who have been leading confidential talks aimed at cutting a deal among bondholders, the government and the federal oversight board responsible for steering Puerto Rico out of its long-running debt crisis. The decision means that a bankruptcy exit plan that cuts pensions for government workers and pays billions of dollars to bondholders will come before Swain for final approval just as lawmakers, whose cooperation is needed to make the plan work, face voters in November. The Financial Oversight and Management Board pushed for approval of its proposed debt-adjustment plan before the election in order to lock in any deal that may come with the current governor and legislature, the federal panel’s lead bankruptcy attorney <b>Martin Bienenstock</b> said in court.
Municipal bond buyers thought Puerto Rico was on the cusp of restructuring its troubled power monopoly on their preferred terms. Now they aren’t so sure, as government leaders harden their stance against hiking electricity rates to pay off billions of dollars in debt, the Wall Street Journal reported. Some of the municipal bond market’s largest investors, including BlackRock Inc. and MacKay Shields LLC, have accumulated hundreds of millions of dollars in claims against the Puerto Rico Electric Power Authority, the public electric monopoly known as PREPA, people familiar with the matter said. They largely have replaced hedge-fund managers that wound down trades on PREPA after several years navigating its bankruptcy. Market-leading bond managers have been wary of Puerto Rico for several years while its finances deteriorated and it entered a court-supervised bankruptcy proceeding in 2017. Much of the U.S. territory’s debt has been held in hedge funds that bought bonds at discounts in the hopes of producing double-digit returns. But PREPA became more attractive to municipal investors last year when it won broad creditor support to repay $8.3 billion in power revenue bonds at no less than 67.5 cents on the dollar, while raising electricity rates to cover settlement payouts. The restructuring proposal required court approval and the cooperation of Puerto Rico’s elected leaders to take effect.
On the heels of his two-day tour of the earthquake devastation in Puerto Rico, U.S. Sen. Richard Blumenthal (D-Conn.) is calling for a modern “Marshall Plan” to rebuild schools, hospitals and power plants across the disaster-stricken island, the Hartford (Conn.) Courant reported. Blumenthal argues that the U.S. respond to the crisis within its own borders with an economic recovery program like the Foreign Assistance Act of 1948, which sent billions of dollars in aid to Western Europe to rebuild infrastructure and modernize industries following World War II. Blumenthal proposes the Trump administration release available funds to Puerto Rico, the Senate approve $4.67 billion in supplemental funding — an initiative already approved by the U.S. House of Representatives — and the federal government remove the existing annual caps on Puerto Rico’s Medicaid, Medicare and SNAP spending.
The government of bankrupt Puerto Rico told a federal judge yesterday that its opposition to a plan announced earlier this month to restructure more than $85 billion of its debt should put the brakes on a confirmation process, Reuters reported. The U.S. commonwealth’s federally created financial oversight board had asked Judge Laura Taylor Swain to approve a schedule that would culminate with a confirmation hearing on a so-called plan of adjustment for Puerto Rico’s core government debt and pension obligations starting in October. The scheduling motion followed the board’s Feb. 9 announcement that it had reached a deal with an expanded group of bondholders to reduce $35 billion of bonds and claims to about $11 billion, moving Puerto Rico closer to exiting bankruptcy, which began in 2017. But Puerto Rico Governor Wanda Vazquez objected to the deal’s enhanced recoveries for some bondholders, while certain government retirees would still face the same pension cuts called for in an earlier plan the board announced in September. In a court filing on Wednesday, Puerto Rico’s fiscal agency said the revised plan of adjustment, which the board has not yet filed in court, was “unconfirmable.”
Puerto Rico’s creditors and government officials have plenty left to fight about before the island has a chance to end its main bankruptcy case as soon as October, a federal court mediator said in a report yesterday, Bloomberg News reported. Although key bondholders and Puerto Rico’s financial oversight board reached a tentative deal during confidential mediation, many complex legal issues and disputes still being negotiated threaten to derail the bankruptcy-exit plan, the lead mediator, U.S. Bankruptcy Judge Barbara Houser, said in the court filing. “The parties’ differences of opinion on certain issues have made that negotiation difficult,” Houser wrote to the federal judge overseeing Puerto Rico’s reorganization. “The mediation team agrees that these issues need to be decided on the merits as soon as possible, as the parties’ disparate views on these issues have been a handicap to the negotiation” of certain issues. To avoid having the bankruptcy-exit plan get bogged down in court, Judge Houser urged U.S. District Court Judge Laura Taylor Swain to temporarily halt certain suits, including a challenge to the legitimacy of some general-obligation bonds filed by a committee of unsecured creditors. Other fights should be decided as soon as possible, including whether investors who hold revenue bonds have the right to to sue and what property rights, if any, they have.
Puerto Rico’s fragile economy is facing an uncertain future after the island’s governor rejected a settlement announced late Sunday with bondholders that would reduce the U.S. territory’s public debt by 70 percent, the Associated Press reported. The settlement is the biggest one to date since the island’s government announced in 2015 that it was unable to pay its more than $70 billion public debt load and filed for the largest U.S. municipal bankruptcy in May 2017. It’s unclear whether the deal will become final, with Gov. Wanda Vázquez saying that it places too heavy a burden on the island’s retirees and noting that it still requires legislative approval. The deal also has to be approved by a federal judge overseeing a bankruptcy-like process for Puerto Rico. If the bondholders receive better treatment in the bankruptcy process, so should retirees,” she said. She said bondholders received new legal protections in amendments made to a September 2019 adjustment plan, but that retirees did not receive anything additional. It’s the latest clash between Vázquez and a federal control board overseeing Puerto Rico’s finances, which reached the deal with several groups of bondholders to reduce the island’s bond debt from some $35 billion to roughly $11 billion. Read more.
Previously, Reuters reported that Puerto Rico would have shed about $24 billion of debt and move closer to exiting bankruptcy under an agreement with bondholders announced yesterday by the U.S. commonwealth’s federally created financial oversight board. The deal aimed to cut $35 billion of bonds and claims to about $11 billion as it increases the ranks of general obligation (GO) and Public Buildings Authority (PBA) bondholders that signed onto a plan to restructure core government debt and more than $50 billion in pension obligations that the board filed in U.S. District Court in September. Read more.
