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President Trump attacked Puerto Rico’s “inept politicians,” accusing them of trying to funnel “ridiculously high” levels of federal disaster assistance toward paying down a $73 billion debt load in his latest confrontation with the U.S. territory’s leadership, WSJ Pro Bankruptcy reported. The president made the suggestion in a tweet yesterday as Puerto Rico’s federal overseers were meeting to approve a revised fiscal framework for rehabilitating the U.S. territory’s finances. The new fiscal plan assumes that Puerto Rico will collect $82 billion in federal assistance and insurance proceeds to rebuild the damage from last year’s hurricanes — a 32 percent increase over a prior disaster-aid projection.

Thousands of Puerto Ricans have been forced to drain their savings, close their businesses, or resign themselves to living with structural damage as they fight insurance companies over millions of dollars’ worth of claims that have gone unanswered or unpaid more than a year after Hurricane Maria, the Associated Press reported. Experts say that the Category 4 storm caught insurance companies off-guard and left them reeling financially after they were hit with nearly 279,000 claims, a number that one expert called “extraordinary.” One major insurer has already folded, leaving more than 1,500 claims worth a total of $70 million up in the air. Many worry other companies might follow. The Office of the Insurance Commissioner of Puerto Rico has already issued fines totaling more than $2.4 million against at least seven companies for delays in resolution and payment of claims. All companies in the U.S. territory had bought reinsurance, but it was insufficient for some.

Puerto Rico bonds rallied yesterday after the commonwealth’s federal oversight board published an updated fiscal plan that apparently acknowledged a greater ability to repay its debt than had been previously estimated, Bloomberg News reported. The latest projections suggest the island would have surpluses after contractual debt service through fiscal 2023, after accounting for a program of planned reforms, whereas previous plans had projected deficits. Without the reforms, the island is still projected to run deficits from fiscal 2021 onward, as federal disaster aid runs out. Puerto Rico general-obligation debt with an 8 percent coupon and maturing in 2035 traded at an average of 59.3 cents on the dollar yesterday, up more than 8 percent from its average of 54.6 cents on the dollar on Oct. 18. Still, Puerto Rico has challenges ahead. The new plan calls for the commonwealth to trim financial support to municipalities and the University of Puerto Rico. It also says the island’s government should cut the number of agencies to no more than 35 from the current 114. "Overall, this is just a plan that lays out a scenario if Puerto Rico were to implement significant reforms and cost cutting measures," said Dora Lee, vice president at Belle Haven Investments, which oversees $7.5 billion in municipal debt. "So far the Puerto Rico government has not shown a willingness to do that."

The Financial Oversight and Management Board for Puerto Rico announced Friday that it filed in court a debt-adjustment plan for the Sales Tax Financing Corp. (Cofina), Caribbean Business reported. The filing, under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) follows a settlement agreement with Cofina’s court-appointed agent, Bettina Whyte, based on an agreement in principle developed by both the Cofina and the commonwealth’s agents, and the preliminary agreement among Cofina bondholders announced Aug. 8, and the subsequent plan support agreement and term sheet between the Government of Puerto Rico, Cofina, monoline insurers, senior and junior bondholders and the Bonistas del Patio creditor group, the board explained. “All of the foregoing agreements were achieved with the assistance of the judicially appointed mediation team led by the Hon. Barbara J. Houser,” a board release reads. The oversight panel also announced it certified, by unanimous consent, a revised fiscal plan for Cofina.

In hearing held on Tuesday by the Puerto Rico House Committee on Economic Development, Planning, Telecommunications, Public-Private Partnerships and Energy, Christian Sobrino Vega, the executive director of the Fiscal Agency & Financial Advisory Authority (AAFAF by its Spanish acronym) said that the proposals for the transmission and distribution of the Electric Power Authority (PREPA) will be available in the first quarter of next year, Caribbean Business reported. In a written statement, Sobrino Vega said the island’s energy sector “is going through a process in which the variables change constantly,” including federal disaster recovery and mitigation funds, and future negotiations in the privatization of the public power corporation. Regarding the restructuring of the utility’s debt, Sobrino said it is “estimated that the terms of the preliminary agreement will achieve more than $3 billion in savings in debt service payments during the next 20 years.”

While history is littered with examples of ill-designed debt restructuring exercises that soon unraveled at great economic and human cost, the recently announced debt restructuring arrangement for Puerto Rico's sales tax-backed bonds (COFINA), the island's economy risks joining those ranks, according to a Bloomberg commentary. The COFINA restructuring doesn’t go nearly far enough as it saddles Puerto Rico with escalating debt payments for the next 20 years, even though the economy has been in a decade-long slump, according to the commentary. If Puerto Rico's government and the oversight board created by Congress agree to similar terms with creditors who hold General Obligation bonds, it will be just a question of time before the commonwealth is forced to default yet again or curtail public pension payments upon which more than 325,000 workers depend, according to the commentary. Read more. 

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

Puerto Rico’s unsecured creditors will drop their opposition to a deal to restructure roughly $4 billion of debt issued by the U.S. commonwealth’s defunct Government Development Bank (GDB), under an agreement revealed on Friday, Reuters reported. During a U.S. District Court hearing, lawyers for the government, the unsecured creditor committee (UCC) and Puerto Rico’s federally appointed financial oversight board announced the agreement. This advances the island’s first consensual debt restructuring under the federal Puerto Rico Oversight, Management and Economic Stability (PROMESA) Act. “We think that Title III debtors and creditors are better off,” said Luc Despins, a lawyer from Paul Hastings who represents the creditor committee. The proposed GDB restructuring deal is being pushed through Title VI of the federal law, which provides for a consensual restructuring framework between the government and creditors. The plan, overwhelmingly approved by creditors last month, would transfer to a GDB Debt Recovery Authority the bank’s municipal loan portfolios, real estate assets and unencumbered cash. The authority would issue new bonds backed by a statutory lien on those assets in an amount equal to 55 percent of outstanding debt. The deal calls for establishment of a Public Entity Trust, which would mostly receive non-performing loans made by the GDB to other government entities.

Puerto Rico bond guarantors are seeking to replace the leaders of the island’s electric-power monopoly with a receiver and shift control over the bankrupt public corporation ahead of a planned privatization, WSJ Pro Bankruptcy reported. Assured Guaranty Corp., MBIA Inc. and Syncora Guarantee Inc. filed court papers on Wednesday denouncing the “chronic dysfunction” under current management at the public power utility known as Prepa. The request would take day-to-day management away from Prepa’s board and put it in the hands of a receiver who could be more friendly to creditors. It would also result in the sixth leadership change at Prepa since Puerto Rico Gov. Ricardo Rosselló took office last year. Prepa, with $9 billion in debt, is soliciting outside investments for its power generation and distribution systems while rebuilding from the damage wrought by Hurricane Maria more than a year ago. This planned privatization is intertwined with a court-supervised bankruptcy where Prepa, the sole electricity provider for most of Puerto Rico’s 3.3 million residents, is trying to reduce its debt.