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Across Puerto Rico, citizens are struggling as a projected $55 billion in aid arrives at a trickle and the White House falters in its support of rebuilding, Bloomberg News reported. This week, President Donald Trump promised “the A Plus treatment” for residents of tornado-torn Alabama, a state where he enjoys strong support. But he has opposed future help for Puerto Rico and falsely claimed that the bankrupt island wanted to use aid to pay its more than $70 billion debt. Recently, the White House even considered raiding recovery funds allocated by Congress to pay for a U.S.-Mexico border wall. Maria killed an estimated 3,000 people in the months after its September 2017 landfall, which leveled homes and businesses and wiped out electricity. So far, the commonwealth has identified 7,505 rebuilding sites and delivered 4,792 reports to the Federal Emergency Management Agency seeking major repairs. Only 67 projects are proceeding, according to Puerto Rico’s government. In a similar period after Hurricane Katrina in 2005, the last U.S. hurricane approaching Maria’s magnitude, more than 9,000 were underway.

A recent U.S. Appeals Court ruling that found Puerto Rico’s federally created fiscal oversight board was unconstitutionally appointed will be appealed to the Supreme Court, the board announced yesterday, Reuters reported. The board, which was authorized under a 2016 federal law known as PROMESA, also said that it is seeking to put on hold the 1st Circuit U.S. Court of Appeals’ decision to set a 90-day period to allow President Donald Trump and the Senate to constitutionally validate the appointments or reconstitute the board. In a Feb. 15 ruling, the Boston-based appeals court said oversight board members are principal U.S. officers and should have been appointed by the president “with the advice and consent of the Senate.” The board said it was established “as an entity within the government of Puerto Rico and not the federal government” and that the U.S. Constitution’s Appointments Clause does not apply to its members.

Hedge funds that own Puerto Rico general obligation bonds are fracturing into competing groups as they jockey for priority in the U.S. territory’s financial restructuring, WSJ Pro Bankruptcy reported. Monarch Alternative Capital LP, GoldenTree Asset Management LP and Whitebox Advisors LLC have formed a committee to differentiate themselves from other general obligation bondholders whose claims are in dispute, according to court records filed on Tuesday. The committee’s formation is partly a reaction to Puerto Rico’s financial overseers, who are taking steps to favor some general obligations over others. Last month the oversight board running Puerto Rico’s bankruptcy questioned the validity of $6 billion in general obligations, saying that they layered more debt on the territory than its constitution allows. The disputed bonds were sold after March 2012 and include Puerto Rico’s 2014 sale of $3.5 billion of high-yielding general obligations, the municipal market’s largest-ever junk-bond issuance.

Puerto Rico’s financial restructuring is ricocheting in a new direction after a federal court ruling threatened to leave the U.S. territory without functioning fiscal supervisors for the first time since its default on its debt, WSJ Pro Bankruptcy reported. The U.S. Court of Appeals for the First Circuit said last week that members of Puerto Rico’s oversight board must be confirmed by the Senate, a potentially game-changing decision that leaves debt restructuring talks and planned economic reforms on shaky ground. If the ruling becomes final, Puerto Rico would once again become a problem for Washington to solve. President Trump and the U.S. Senate would have 90 days to confirm the existing board members or new nominees. But with hundreds of Trump administration executive-branch nominations stalled in the Senate, it is doubtful that any board nominees put forth by the White House could be confirmed in time, according to lawyers, consultants and other experts following the matter. The board could lose its constitutional authority to act if the 90-day deadline comes and goes, creating a power vacuum and setting off a new period of uncertainty for Puerto Rico’s residents, businesses and bondholders.

Reversing the district court, the First Circuit threw the Puerto Rico debt restructuring into a cocked hat by declaring that the appointment of the members of the Financial Oversight and Management Board of Puerto Rico violated the Appointments Clause of the Constitution because they were not nominated by the President and confirmed by the Senate, according to an analysis in yesterday's <em>Rochelle's Daily Wire</em>. The appeals court attempted to limit damage by declaring that the ruling will not go into effect for 90 days, allowing the President and the Senate in the meantime to validate the appointments to the Board or to reconstitute the Board in accordance with the Appointments Clause. Relying on the de facto officer doctrine, the First Circuit ruled that its opinion would “not eliminate any otherwise valid actions of the Board prior to the issuance of our mandate in this case.” In other words, the appeals court is allowing the Board to continue functioning for 90 days and will not unravel any actions already taken by the Board. 

Puerto Rico’s Sales Tax Financing Corporation, known as COFINA, yesterday issued $12 billion of new bonds as a federal court-approved deal between the bankrupt U.S. commonwealth and its creditors took effect, according to island officials, Reuters reported. The plan of adjustment approved by U.S. District Court Judge Laura Taylor Swain on Feb. 4 restructures about $17 billion of sales tax-backed debt, leaving senior bondholders to recover 93 percent of their original investment, while junior bondholders recover only 56 percent. The island, which is trying to restructure about $120 billion of debt and pension liabilities through a form of municipal bankruptcy that Swain is overseeing, previously won court approval for a consensual deal with creditors over about $4 billion of debt related to its Government Development Bank (GDB). According to Puerto Rico’s federally created oversight board, the COFINA plan will slash debt service on the sales tax-backed debt by $17.5 billion over nearly 40 years, saving the island an average $456 million annually.

A small group of hedge funds are being rewarded for backing an $18 billion restructuring of Puerto Rico’s sales-tax debt that saddled other investors with losses, the Wall Street Journal reported. Tilden Park Capital Management LP and GoldenTree Asset Management LP are among the credit-market specialists that have reaped hundreds of millions of dollars in paper profits on those revenue bonds and are poised to collect more under settlement terms that provide them with stronger claims to repayment than before, according a Wall Street Journal analysis of court records and trading information. The deal slashed $6 billion in value from the bonds known as Cofinas, a painful outcome for individual investors who bought them at full price starting in 2007. But as some investors gave up hope of being repaid, hedge funds bought top-ranking Cofina bonds at beaten-down prices, betting they would fare better than others in a restructuring.

A U.S. federal judge yesterday approved a plan to restructure $17 billion of debt from Puerto Rico’s Sales Tax Financing Corporation, known as COFINA, marking the second deal between the bankrupt U.S. commonwealth and its creditors to win court approval, Reuters reported. Judge Laura Taylor Swain, who is hearing Puerto Rico’s bankruptcy case filed in May 2017, called the COFINA plan “a significant step on the path towards Puerto Rico’s financial recovery, economic stability, and prosperity.” The island, which is trying to restructure about $120 billion of debt and pension liabilities, won court approval in November for a consensual deal with creditors over about $4 billion of debt related to its Government Development Bank (GDB). According to Puerto Rico’s federally created oversight board, the COFINA plan will slash debt service on the sales tax-backed debt by $17.5 billion over nearly 40 years, saving the island an average $456 million annually.