%1

The Trump administration yesterday walked back the president’s apparent vow to wipe out Puerto Rico’s debt, suggesting that the island would have to solve its own fiscal woes despite the catastrophic damage it has endured from two powerful hurricanes, the New York Times reported today. “I wouldn’t take it word for word with that,” Mick Mulvaney, director of the Office of Management and Budget, said on CNN in reference to President Trump’s suggestion that the United States might clear Puerto Rico’s debt. Mulvaney said that the administration would be focusing its efforts on helping Puerto Rico rebuild from storm damage but that the commonwealth would continue to proceed through the debt restructuring process it was undertaking before the storm. “Puerto Rico is going to have to figure out how to fix the errors that it’s made for the last generation on its own finances,” Mulvaney said. Read more. 

Puerto Rico Treasury Secretary Raul Maldonado said that the U.S. commonwealth faces a government shutdown on Oct. 31, including halting its hurricane recovery, if Congress doesn’t provide billions in emergency funds, Bloomberg News reported. Puerto Rico’s bankrupt government is burning through the $1.6 billion it had on hand before Hurricane Maria ravaged the island, destroying decayed infrastructure and killing 34 people. With widespread damage to telecommunications systems and the electricity grid, Maldonado doesn’t expect to begin collecting sales tax for at least another month, he said yesterday. “I don’t have any collections, and we are spending a lot of money providing direct assistance for the emergency,” he said in an interview in San Juan. “Without the assistance from Congress, Puerto Rico’s government will not be able to operate next month.” Read more. 

President Donald Trump suggested that the government debt accumulated by bankrupt Puerto Rico would need to be wiped clean to help the island recover from the devastation caused by Hurricane Maria, Bloomberg News reported today. “We are going to work something out. We have to look at their whole debt structure,” Trump said yesterday in an interview. “You know they owe a lot of money to your friends on Wall Street. We’re gonna have to wipe that out. That’s gonna have to be — you know, you can say goodbye to that. I don’t know if it’s Goldman Sachs but whoever it is, you can wave goodbye to that.” Puerto Rico is dealing with an immediate humanitarian disaster made worse by the long-term debt crisis that led it to declare a form of bankruptcy this year. The White House is crafting a $29 billion disaster-aid package it intends to send to Congress that would include $16 billion to shore up the federal flood insurance program and $13 billion in additional relief covering the entire hurricane and wildfire season, including major storms that hit Texas, Louisiana and Florida as well as Puerto Rico, according to a Republican lawmaker. At a briefing with local officials in an airport hangar, Trump complained — perhaps as a joke — about the expense of the federal response to the storm. “I hate to tell you, Puerto Rico, but you’ve thrown our budget a little out of whack — because we’ve spent a lot of money on Puerto Rico and that’s fine, we’ve saved a lot of lives,” Trump said.

Creditors approached Puerto Rico’s government with offers surrounding the U.S. territory’s bankruptcy after Hurricane Maria tore through the island last month, but federal aid remains the top priority, a Puerto Rico official said yesterday, Reuters reported. “Any offer we’ll review it, and we’ll discuss it with the oversight board and their advisers,” said Christian Sobrino, Governor Ricardo Rosselló’s official liaison to the federally appointed Financial Oversight and Management Board. No offers by creditors have been put in place and the government has not met with creditor groups on the proposals, Sobrino said, adding that communications remain a challenge on the island. Creditors of Puerto Rico’s bankrupt power utility PREPA already offered a $1 billion loan and a discount on existing debt last week after Maria knocked out power to Puerto Rico’s 3.4 million residents, but the government shut down the proposal, calling it a “publicity stunt.”

Rep. Rob Bishop (R-Utah), chairman of the House Natural Resources Committee, announced a member forum for Wednesday, Oct. 4, at 3 p.m. to discuss potential legislative actions within the committee’s purview to reinforce ongoing rescue and recovery efforts in Puerto Rico and the U.S. Virgin Islands, Caribbean Business reported on Friday. “Millions of American citizens on the mainland and our U.S. territories continue to face extreme hardship due to the devastation of recent hurricanes. In Puerto Rico and the U.S. Virgin Islands, the situation remains particularly dire as flooding, downed infrastructure and power outages impede food and water from reaching large populations. In many areas, the magnitude of the destruction is unprecedented. This forum is a starting point as we evaluate policies and programs within our jurisdiction to support emergency response, help mitigate the loss of human life and hasten the path to recovery,” Bishop said. Read more. 

In related news, the oversight board in charge of resolving Puerto Rico’s debt crisis said on Saturday that its members met with Trump administration officials and members of the U.S. Congress this week to ask for increased financial assistance for the hurricane-struck island, Reuters reported. Puerto Rico, a U.S. territory, filed for the biggest-ever U.S. local government bankruptcy in May. 

Additionally, Puerto Rico needs to work with the U.S. government to determine how to fund rebuilding after Hurricane Maria and what to do about the territory’s heavy debt load, President Donald Trump said on Friday. “Ultimately, the government of Puerto Rico will have to work with us to determine how this massive rebuilding effort, which will end up being one of the biggest ever, will be funded and organised and what we will do with the tremendous amount of existing debt already on the island,” Trump said. Read more. 

The U.S. Trustee Program (USTP) yesterday announced a temporary waiver of the federal statutory requirements for credit counseling and personal financial management education for consumer bankruptcy filers in the District of Puerto Rico and the District of the U.S. Virgin Islands, due to the effects of Hurricanes Irma and Maria, according to a press release. The Bankruptcy Code permits U.S. Trustees to waive the credit counseling and financial education requirements within a judicial district where approved agencies and providers are not reasonably able to provide adequate services. Acting U.S. Trustee Guy Gebhardt made this determination with respect to the District of Puerto Rico and the District of the Virgin Islands. The waiver applies to bankruptcy cases filed on or after September 28, 2017. Read more. 

In related news, prices of the Puerto Rico’s bonds have plunged to record lows, signaling investors expect that there will be even less money available to repay its $74 billion of debt, Bloomberg News reported. Puerto Rico’s federal overseers, who are in charge of pulling it from a financial collapse, today plan to reassess the island’s fiscal plan — including how much debt it can pay — in light of the storm. Bondholders “will have to experience some amount of pain or financial devaluation of their stakes,” said David Tawil, president and co-founder of Maglan Capital LP, which no longer owns Puerto Rico bonds. Tawil estimates some prices will need to drop by as much as 20 percent, given the hit that Maria will deal to tax collections. “I don’t think anybody has any appreciation for how devastating the effects of the storm will be." Read more.

This year’s hurricane season has become one of the most destructive in recent memory. To provide assistance to those affected and direct others in how you can help, ABI encourages you to visit our Hurricane Relief webpage. 

After wondering for seven sweltering days who would pay to rebuild their ruined electrical grid, Puerto Ricans got a possible answer from an unexpected source yesterday: investors holding the island power company’s defaulted bonds, the New York Times reported. The bondholders, a group that includes mutual-fund giants and hedge funds, have offered to lend Puerto Rico $1 billion to pay for urgent repairs and to cancel $150 million of the power company’s outstanding debt in the process. Because of how it is structured, the proposal by the bondholders could help them even as it helps Puerto Rico. The loan would not be enough to replace the island’s aged electrical system, which was knocked out by Hurricane Maria, leaving more than three million people without power and, in some cases, water. The bondholders say, however, that in addition to covering immediate repairs, their offer would allow Puerto Rico to apply for federal grants for long-term rebuilding that would not have to be repaid.

Judge Laura Taylor Swain issued an order on yesterday delaying two upcoming hearings that were scheduled for Sept. 27 and Oct. 4, TheStreet.com reported. The first of these was to take place in New York in an adversarial proceeding brought by a bond insurer. The oral arguments that had been scheduled will be moved to Oct. 4 from Sept. 27. The second, Puerto Rico's monthly general hearing that was to take place in Puerto Rico, has been delayed from Oct. 4 to an as yet undetermined date. Judge Swain added that these proceedings will take place in New York until further notice with "every effort made to facilitate viewing from the San Juan courthouse." In her order Swain noted the depth of the crisis currently taking place in Puerto Rico in the wake of Hurricane Maria. Read more. 

In related news, Puerto Rico’s health care system is grappling with widespread power losses, crippled hospitals and dwindling medical supplies nearly a week after Hurricane Maria devastated the U.S. territory, according to doctors and relief workers, the Wall Street Journal reported today. Securing more fuel for generators and clean water for patient care are “two important priorities” for the island’s hospitals and clinics, said Kenneth Sturrock, the federal health coordinator for the U.S. Department of Health and Human Services who was on the ground in Puerto Rico yesterday. The National Disaster Medical System has sent 330 health-care workers from the U.S. mainland to assist Puerto Rico, he said, and U.S. lawmakers are pushing for quick approval of hurricane aid. Read more. (Subscription required.) 

This year’s hurricane season has become one of the most destructive in recent memory. To provide assistance to those affected and direct others in how you can help, ABI encourages you to visit our Hurricane Relief webpage. 

Puerto Rico’s government yesterday asked a judge for up to four extra weeks to meet key deadlines in the U.S. territory’s bankruptcy case, after Hurricane Maria tore through the island, bringing its fragile infrastructure to its knees, Reuters reported today. In court papers filed in U.S. bankruptcy court in San Juan, the Puerto Rico Fiscal Agency and Financial Advisory Authority sought “urgent” permission from federal Judge Laura Taylor Swain, who oversees the $72 billion bankruptcy, for a four-week extension on discovery in a slew of legal disputes in the case. The authority also requested that Swain reschedule an upcoming court hearing to Oct. 18 from Oct. 4, and move the hearing from San Juan to federal court in New York, where Swain is based. Read more. 

In related news, Gov. Ricardo A. Rosselló of Puerto Rico said yesterday that the island was on the brink of a “humanitarian crisis” nearly a week after Hurricane Maria knocked out its power and most of its water, and left residents waiting in excruciating lines for fuel, the New York Times reported today. Stressing that Puerto Rico, a U.S. territory, deserved the same treatment as hurricane-ravaged states, the governor urged Republican leaders and the federal government to move swiftly to send more money, supplies and relief workers. “If we want to prevent, for example, a mass exodus, we have to take action. Congress, take note: Take action, permit Puerto Rico to have the necessary resources,” Rosselló said. Read more. 

U.S. lawmakers, worried about the devastation to Puerto Rico after a powerful hurricane struck the island, are pushing for quick approval of relief funding while bracing for a battle about financing a new power system in the American territory, the Wall Street Journal reported today. Heading to Puerto Rico to assess the damage, Sen. Marco Rubio (R-Fla.) ran through the island’s immediate challenges, including power outages stemming in part from widespread damage to transmission lines and a dearth of trucks, other equipment and personnel to begin the restoration process. U.S. officials say that Puerto Rico faces a longer road to recovery than any other part of the U.S. hit by a hurricane, partly because the island nation needs to ship and fly in equipment and personnel that can simply be trucked in to states like Florida and Texas. Read more. (Subscription required.) 

This year’s hurricane season has become one of the most destructive in recent memory. To provide assistance to those affected and direct others in how you can help, ABI encourages you to visit our Hurricane Relief webpage.