%1

Puerto Rico’s governor yesterday withdrew his labor reform proposal after the island’s oversight board demanded additional measures, deepening a divide in the parties’ efforts to reach a consensual turnaround plan for the bankrupt, storm-ravaged island, Reuters reported. Governor Ricardo Rosselló said demands made by the federally appointed board earlier yesterday would have made his labor reform plan “impossible.” “The board pretends to dictate the public policy of the government, and that, aside from being illegal, is unacceptable,” Rosselló said in a statement on Wednesday evening. Puerto Rico is navigating both the biggest bankruptcy in U.S. government history, with $120 billion in combined bond and pension debt, and its worst natural disaster in 90 years caused by September’s Hurricane Maria. Puerto Rico’s federally appointed financial oversight board on Wednesday insisted on pension cuts and other austerity measures as conditions for approving a turnaround plan for the bankrupt island still reeling after Hurricane Maria. In a seven-page letter to Governor Rosselló, the board called for a revised plan with an average of 10 percent cuts to public employee pensions, provided that no one is pushed into poverty by the cuts. The demand is part of a bankruptcy process under which Puerto Rico must submit a blueprint for regaining its financial footing. The plan must be approved by the oversight board, which may impose its own plan if both sides cannot agree. Read more. 

In related news, Puerto Rico’s Government Development Bank, the island’s insolvent former fiscal agent now in wind-down mode, has tweaked its $5 billion debt restructuring deal to help keep small towns afloat six months after Hurricane Maria, Reuters reported. Governor Ricardo Rosselló’s office said in a statement on Tuesday that the bank, known as the GDB, will allow towns to offset any loans owed to it with assets on deposit at the bank. The towns also will be allowed immediate payment of 55 percent of certain assets held at the GDB. Those concessions are offset by other changes that keep the new structure roughly neutral for creditors, who will receive the same 55 percent repayments they would under the original deal, struck in May. “The amendment to the RSA (Restructuring Support Agreement)is a significant step forward toward the GDB debt restructuring and the ultimate resolution of GDB,” Rosselló said. Like the old agreement, the deal splits the GDB into two entities — the first to issue new debt to repay municipal depositors and bondholders, and the second to serve as a public trust for the benefit of other depositors, according to the statement from Rosselló’s office. 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. 

Puerto Rico’s benchmark bond surged to a 25-week high yesterday, its busiest trading day since October, after the bankrupt U.S. territory nearly doubled its projected five-year surplus to $6 billion as it recovers from Hurricane Maria, Reuters reported. While the price rise is being taken as a sign the market is beginning to see a recovery path for the storm-ravaged island, analysts remained wary, taking the spike with a grain of salt. General obligation bonds maturing in 2035 changed hands more than 100 times yesterday and traded as high as 45 cents on the dollar, the bond’s highest level since Oct. 3. While still down sharply from the 60-cent range the bonds had occupied before Maria struck on Sept. 20, prices are continuing a steady, month-long climb as the island’s recovery prospects improve. Senior bonds backed by sales tax revenue, so-called COFINA debt, have fared even better, reaching 63.51 cents in light trading on Monday, higher than they were in the weeks before the storm. The latest bounce came on the heels of a revised financial outlook released by Puerto Rico’s government on Friday that projected the U.S. territory to accumulate a $6 billion surplus over the next five years. An earlier version of the so-called fiscal turnaround plan, released in February, had forecast the surplus at $3.4 billion.

Puerto Rico’s federally appointed Financial Oversight and Management Board said on Friday it would postpone certification of the bankrupt U.S. commonwealth’s fiscal plan and announce a new certification date soon, Reuters reported. The board said it would also reschedule the plans to transform the island’s deficit for its power and water authorities, Puerto Rico Electric Power Authority (PREPA) and the Puerto Rico Aqueduct and Sewers Authority (PRASA). Asked about the reason for the decision, a spokesman said the board “is continuing to work with the government on the details of the plans.” The board is tasked with helping the U.S. territory manage its finances as it navigates the biggest bankruptcy in U.S. government history, trying to shed $120 billion in bond and pension debt. Natalie Jaresko, who leads the oversight board’s executive team, told Reuters she had expected the revised fiscal reform plans submitted by Puerto Rico’s government to be certified today. 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 U.S. Treasury Department and storm-ravaged Puerto Rico say that they have reached a deal to let the bankrupt U.S. territory access billions of dollars in long-disputed federal loans to help it recover from last year’s Hurricane Maria, Reuters reported. In a joint news conference on Thursday in San Juan, broadcast on the internet, Puerto Rico Governor Ricardo Rosselló and U.S. Treasury Secretary Steven Mnuchin said the island can access the so-called community disaster loans (CDLs) as needed until March 2020, once its cash balance dwindles below $1.1 billion. The agreement still needs approval by the federally-appointed board that oversees Puerto Rico’s finances, as well as the judge presiding over its $120 billion bankruptcy. The dispute over the loan had ratcheted up tensions between Puerto Rico and Washington, as the island battles the aftermath of its biggest natural disaster in 90 years, while navigating the largest government bankruptcy in U.S. history. It also raised questions about the reliability of Puerto Rico’s financial record-keeping. The U.S. Congress in October appropriated $4.9 billion in loans for Puerto Rico and the U.S. Virgin Islands, but while the Virgin Islands were allowed access to the funds — and have drawn down around $200 million so far — Puerto Rico was not. Read more. 

In related news, the U.S. government is scaling back the number of contractors working on Puerto Rico’s storm-damaged electrical grid at a time when roughly 100,000 island residents still lack power, drawing fresh scrutiny from lawmakers over the federal response to Hurricane Maria, WSJ Pro Bankruptcy reported. The House Oversight and Government Reform committee heard testimony yesterday from U.S. officials about bureaucratic challenges to power-restoration efforts in the U.S. territory. Members of Congress from both parties have questioned a drawdown of personnel there by the U.S. Army Corps of Engineers. The Army Corps stepped in after Hurricane Maria struck in September. It hired two contractors, Fluor Corp. and PowerSecure Inc., to spearhead reconstruction of damaged transmission and distribution lines. The companies are now demobilizing workers as those federal contracts reach their limits. Fluor and PowerSecure had 1,141 contract workers in Puerto Rico on Wednesday, down from more than 4,000 during much of February, according to tweets from the official Army Corps Twitter account. Yet electricity woes continue to plague Puerto Rico, where nearly 100,000 customers, on an island of more than three million, still lack service. Nearly all power generation is back online, but the grid system is prone to sudden outages. Gaps in the above-ground transmission system mean electricity isn’t reaching some rugged, mountainous regions. 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.

Treasury Secretary Steven Mnuchin said he aims to wrap up negotiations today on a multi-billion dollar loan to Puerto Rico’s government that the territory’s leaders have complained is long overdue after Hurricane Maria ravaged the island in September, Bloomberg News reported. Mnuchin will hand-deliver documents related to the loan in his first visit to the territory as a public official, he said. “I’m meeting with them in case there are final issues that we need to negotiate — we are prepared to do that,” he said Wednesday in an interview with Bloomberg News. “I want to make sure that we fulfill the mandate from Congress to make sure that the loan facilities are in place.” Puerto Rico’s leaders have complained that Mnuchin’s department has slowed loans the territory needs to rebuild following the storm, which devastated the island. In February, Puerto Rico Governor Ricardo Rosselló said that Mnuchin was acting “recklessly” by delaying the territory’s access to a share of a $4.9 billion loan package that Congress passed in October.

Though economic activity in Puerto Rico has picked up in recent months, businesses large and small are struggling, the Wall Street Journal reported. Electricity woes continue to plague the island, where 91 percent of power generation has been restored but the grid is prone to sudden outages. Insurance money has arrived slowly, with $1.7 billion paid in residential and business claims as of Jan. 31 — about 40 percent of the expected total, according to the island’s Office of the Commissioner of Insurance. And the market is shrinking as a result of an accelerating exodus of Puerto Ricans fleeing conditions on the island. An estimated 135,000 residents have relocated to the U.S. mainland since Maria, according to an analysis released this month by the Center for Puerto Rican Studies at New York’s Hunter College. Read more. (Subscription required.) 

In related news, structural reforms could boost Puerto Rico’s economy by as much as 1.5 percent, but federal tax law changes on top of deadly hurricanes pose additional challenges, the executive director of the island’s financial oversight board said, Reuters reported. Natalie Jaresko, who leads the federally appointed Financial Oversight and Management Board’s executive team, said that she expects the revised fiscal reform plans submitted by the U.S. commonwealth’s government to be certified on March 26. The three critical structural reform areas she highlighted were the electrical grid, overseen by the beleaguered Puerto Rico Electric Power Authority (PREPA) that is slated to be partially privatized; labor market reforms; and making it easier to do business. 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. 

Debt from Puerto Rico is the top-performing bond investment of 2018, reflecting an unexpected improvement in the island’s economy and budding hopes for a settlement with creditors to resolve its continuing bankruptcy, the Wall Street Journal reported. Most U.S. bonds have lost value this year because of rising interest rates, but an index of Puerto Rico municipal bonds has returned 14 percent year to date, the top performer out of 323 bond indexes maintained by S&P Dow Jones Indices. Prices of certain Puerto Rico bonds have more than doubled since the end of December. The rally began in January, when Puerto Rico’s government revealed economic data showing previous estimates of the financial impact of Hurricane Maria were overly pessimistic. More recently, investors have been buying bonds in anticipation of substantive talks with bondholders to reach a consensual restructuring, bondholders and people involved in the negotiations said.