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Puerto Rico will receive nearly $600 million in emergency federal assistance to help the island’s schools recover from Hurricane Maria, the U.S. Department of Education announced today, the Orlando Sentinel reported. The new funding is part of the department’s Immediate Aid to Restart School Operations program, also known as the K-12 Restart program, which allows the agency to award emergency assistance to schools affected by last year’s natural disasters, including three hurricanes and wildfires. The department also announced the Texas Education Agency will receive $89.4 million and the California Department of Education will be awarded about $14.4 million. This initial funding marks the first phase of a process that the department says will give impacted states opportunities to apply for additional funding in the future. Earlier this month, the Department of Education in Puerto Rico announced the closure of over 280 schools, as student enrollment plummeted after Maria and the island continues to experience massive population loss. Since the September storm, thousands of Puerto Rican students have enrolled in schools throughout Central Florida.

Puerto Rico’s federal oversight board approved a five-year strategy for the U.S. territory’s financial rehabilitation, all but ensuring a confrontation with Gov. Ricardo Rosselló over new austerity measures, WSJ Pro Bankruptcy reported. The seven-member oversight board installed by Congress certified a fiscal plan covering Puerto Rico’s central government Thursday with one dissenting vote. The financial blueprint includes a 10 percent average cut for beneficiaries of Puerto Rico’s insolvent pension system while reducing spending on social programs, island municipalities and the University of Puerto Rico. Those belt-tightening measures are sure to escalate tensions with Gov. Rosselló, who has opposed reductions in retiree benefits and criticized the oversight board for dictating government policy decisions that he said should remain with local elected officials.

The losing bidder on a deal to repair Puerto Rico’s storm-damaged power grid is disputing the contract award while residents grappled yesterday with a power outage that officials blamed on one of the winning firms, WSJ Pro Bankruptcy reported. Some customers may not regain power for 24 to 36 hours following a morning blackout caused by a power line failure, according to the public power monopoly known as PREPA. The incident marks the first island-wide outage since Hurricane Maria struck in September and the latest headache for the U.S. territory as it struggles to restore basic services. PREPA engineer Justo González called the outage “unacceptable” in a press conference Wednesday and blamed it on an excavator mishap involving D. Grimm Inc., a company hired by PREPA contractor Cobra Acquisitions LLC. PREPA hired Cobra in the weeks after Maria struck and has since nearly quadrupled the size of their deal to $945 million. Read more. 

In related news, Puerto Rico’s federally-appointed oversight board yesterday unveiled a framework for the bankrupt island’s fiscal turnaround that breaks with Governor Ricardo Rosselló’s vision, pushing pension cuts and labor reforms while hinting at layoffs, Reuters reported. The plan, expected to be approved by the board at a public hearing beginning Thursday in San Juan, forecasts $6.7 billion in debt payment ability through 2023. Tasked with helping the U.S. territory regain access to debt markets, the board has been negotiating with Rosselló for months on a fiscal blueprint for Puerto Rico’s recovery from the dual scourges of fiscal insolvency and natural disaster. But the board can impose a plan unilaterally if it cannot reach terms with the governor, and was expected to do so after Rosselló earlier this month opposed the board’s calls for labor and pension reforms. Read more. 

Puerto Rico’s governor announced a deal last month with U.S. Treasury Secretary Steven Mnuchin that they said would release billions of dollars in federal loans to the island government’s coffers, but there are doubts that will take place, according to a WSJ Pro Bankruptcy commentary. Under the agreement, Puerto Rico can access the taxpayer-funded emergency loans once government cash balances fall below $1.1 billion. The implicit directive was for Puerto Rico to spend down its resources propping up its water and power authorities, which have more pressing needs for cash, after which it could qualify for government help. But the financing, known as a Community Disaster Loan, includes other conditions that make its delivery uncertain even if Puerto Rico’s liquidity dwindles, according to a term sheet drafted by the Treasury Department and reviewed by WSJ Pro Bankruptcy. Puerto Rico Gov. Ricardo Rosselló has complained that federal authorities were slow-walking the assistance despite mounting bills from repairing power systems and other infrastructure damaged by Hurricane Maria in September. U.S. officials said in January that Puerto Rico’s cash holdings were too high despite a slowdown in tax collections and business activity in the storm’s aftermath. Puerto Rico’s application was also complicated by its disclosure in December that it had identified $6.9 billion in cash scattered across various public bank accounts. Not all of the money is available to be spent. Some is restricted to specific purposes and some is tied up in lawsuits with bondholders under Puerto Rico’s court-supervised bankruptcy.

Puerto Rico bondholders in court yesterday denounced the island’s sales tax authority, COFINA, as a sham “end-run” around its constitution, in a creditor battle for control of the bankrupt, storm-ravaged island’s future tax revenues, Reuters reported. At a hearing in federal court in New York, a lawyer for a group of general obligation (GO) bondholders said Puerto Rican leaders created COFINA in 2006 so they could issue new bonds without technically violating the island’s constitutional limit on government debt sales. The dispute is central to sorting out Puerto Rico’s $71.5 billion in debt, about half of which is owed to GO and COFINA bondholders. Each side is owed about $18 billion and claims an ironclad right to the sales tax revenue. The outcome will determine which group recovers more of its investment, and which side will have a claim on decades of future sales tax. Puerto Rico’s legislature created COFINA as the island slid toward a financial cliff and needed to raise cash. To ease nervous investors, lawmakers secured COFINA’s debt with sales tax revenue, and declared COFINA the owner of the revenue. Read more. 

In related news, Puerto Rico will receive $18.5 billion from the U.S. Department of Housing and Urban Development to help rebuild its battered housing stock and infrastructure after September’s Hurricane Maria, the island’s governor and HUD officials said yesterday, according to a Reuters report. The funding for the U.S. territory was the largest grant in the history of the HUD, said HUD undersecretary Pamela Patenaude. But the award was significantly less than the $46 billion requested by Governor Ricardo Rosselló in November. HUD is awarding a total of roughly $28 billion to nine states, the U.S. Virgin Islands and Puerto Rico that have been recently affected by major disasters, including Hurricanes Irma, Harvey and Maria, as well as the recent California wildfires. The funds are part of a $90 billion disaster aid package signed by Trump in February. The Virgin Islands is set to receive $1.6 billion in HUD disaster recovery funds. Read more. 

Puerto Rico’s latest turnaround plan boosts the insolvent U.S. territory’s projected ability to pay debt, but the plan’s absence of pension cuts and layoffs means some alterations may be in store, courtesy of the island’s oversight board, Reuters reported. The plan, published on Thursday, forecasts a cumulative surplus of $6.3 billion through fiscal year 2023, and $7.36 billion after accounting for non-recurring items. That projection started as a deficit in January, and has climbed incrementally through a handful of draft plans. Puerto Rico, which is in bankruptcy with $120 billion in debt while it struggles to recover from the devastation caused last September by Hurricane Maria, is required to submit a turnaround plan as a basis for planned restructuring talks with bondholders. Puerto Rico’s benchmark GO bond traded at 43 cents on the dollar on Friday, up from a close of 41.06 cents on Thursday , according to Thomson Reuters. It had been trading around 60 cents before Maria hit.

Puerto Rico’s governor yesterday fiercely defended his administration’s right to help steer the insolvent, storm-ravaged island out of bankruptcy after a U.S. congressman said the process should be led by the island’s creditors and federally appointed oversight board, Reuters reported. In a scorching, 6,000-word letter delivered yesterday to Rep. Rob Bishop (R-Utah), Governor Ricardo Rosselló accused the Republican lawmaker of turning “back the clock many decades to a time when the federal government simply imposed its will” on the U.S. territory. Bishop, who chairs the House of Representatives Committee on Natural Resources, was at the forefront of a 2016 federal law known as PROMESA, which moved Puerto Rico’s finances under the management of a federally appointed board. In a letter last week, Bishop censured the board for lack of progress on a massive planned debt restructuring in Puerto Rico, directing the board to seek more input from the island’s financial creditors on a plan to stabilize the island. Rosselló said yesterday that flew in the face of PROMESA, which calls for the board and the governor to work together. He said that the sides had made consensual progress on elements of Puerto Rico’s restructuring. Read more.

The people of Puerto Rico need your help. Thousands are still without regular power service, and many more need to rebuild their homes. Please join the ABI Endowment and the Mariano Rivera foundation tomorrow for a charity benefit for Puerto Rico at the New York Athletic Club. 

Puerto Rico’s governor said yesterday that he would submit a revised fiscal turnaround plan on Thursday to the island’s federally appointed oversight board, but the plan would not include labor reforms and pension cuts the board demanded, Reuters reported. Governor Ricardo Rosselló also said the government of the bankrupt and hurricane-ravaged island would not allow the oversight board to usurp its legislative powers. “The Government will not allow the takeover of these powers, and therefore cannot be compelled to implement many of the suggested revisions,” Rosselló told the board in an letter made public with a press release. The revised plan will exclude layoffs of public employees, the release said. Read more. 

The people of Puerto Rico need your help. Thousands are still without regular power service, and many more need to rebuild their homes. Please join the ABI Endowment and the Mariano Rivera foundation for a charity benefit for Puerto Rico on April 4, 2018, at the New York Athletic Club. 

The chairman of the U.S. House Committee on Natural Resources censured Puerto Rico’s federally-appointed oversight board yesterday over delays in the island’s debt restructuring, the latest sign of discord over how to fix the bankrupt, storm-ravaged U.S. territory, Reuters reported. In a letter to the board, which was created by U.S. Congress in 2016 to manage Puerto Rico’s finances, Rep. Rob Bishop (R-Utah) said that it had not done enough to engage with Puerto Rico’s financial creditors on a massive debt restructuring, nor enforce much-needed structural reforms in Puerto Rico. “I remain frustrated with the oversight board’s inability and unwillingness to reach consensual restructuring agreements with holders of Puerto Rico’s debt,” he said. The island is navigating both the largest bankruptcy in U.S. government history, with $120 billion in combined bond and pension debt, and its worst natural disaster in 90 years in September’s Hurricane Maria. The storm killed dozens and caused tens of billions of dollars in damage, while thousands of Puerto Rico’s 3.3 million residents remain without power more than six months later. Read more. 

The people of Puerto Rico need your help. Thousands are still without regular power service, and many more need to rebuild their homes. Please join the ABI Endowment and the Mariano Rivera foundation for a charity benefit for Puerto Rico on April 4, 2018, at the New York Athletic Club.