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After three years of futile efforts to restructure some $9 billion of debt at Puerto Rico's PREPA, creditors of the now-bankrupt power utility are asking a U.S. federal judge to appoint a receiver to manage PREPA's assets, Reuters reported yesterday. In papers filed yesterday in U.S. bankruptcy court in San Juan, PREPA creditors said that a receiver was needed to ensure the utility sets electricity rates high enough to service debt. Political appointees of Puerto Rico's Governor Ricardo Rossello, they argued, cannot be trusted to do so. "PREPA’s interests cannot be adequately served or protected if they are subjected to the whims of the governor's agenda," said the creditors, which include bondholders such as Oppenheimer Funds and insurers like Assured Guaranty. Read more. 

For updated news and analysis of Puerto Rico's debt crisis, along with current docket filings in Puerto Rico's case, be sure to visit ABI's "Puerto Rico in Distress" webpage.

Puerto Rico entered its own form of bankruptcy in early May, and the financial crisis there is still getting worse. But even as the restructuring process devolves into more lawsuits, defaults, and downgrades, some ripple effects are creating surprising opportunities for investors, the Wall Street Journal reported yesterday. Consider what’s going on with MBIA, the parent of bond insurer National, which insures about $4 billion in par value of Puerto Rico bonds. (That’s about $8.5 billion in total debt exposure, including all scheduled interest payments and principal.) MBIA’s business plans were torpedoed by a two-notch rating downgrade by S&P Global Ratings in late June. The firm laid off employees and said that it would give up trying to write new business, as bond insurers have to be rated higher than municipalities for the insurance to add any value. Yet MBIA’s shares have been rising ever since. On Tuesday, management told investors to expect shareholder-friendly moves, such as more stock buybacks and perhaps a special dividend—even as it had to increase accounting for losses related to Puerto Rico. Executives say the firm, which has the ability to pay claims equal to $4.6 billion, is now “unshackled from most of the limitations imposed by the rating agencies” by not writing new business.

Distressed-mortgage investors are descending on troubled Puerto Rico, Bloomberg News reported on Friday. There are big names among them: Goldman Sachs Group Inc. and Perella Weinberg Partners and TPG Capital. What’s luring them is the opportunity to scoop up home loans and foreclosed properties for pennies on the dollar. Many of the homes have spectacular views of the Caribbean that could be pitched to well-heeled Americans — but long-time Puerto Rico investors see trouble ahead. Chief among their concerns: bidding wars are breaking out for the loans at the same time that their quality is deteriorating. The firms are wagering they can strike a deal with borrowers to make the debt viable or go after property in court and resell it. Many have made out well investing in such properties on the mainland, where U.S. housing prices have rebounded about 40 percent from post-crisis lows. Yet investors risk inundating the market with foreclosed properties, driving down prices even further and impeding an economic recovery — a concern to working-class Puerto Ricans hoping to protect the last shred of equity in their homes.

Puerto Rico's financial oversight board late on Friday approved a plan to wind down the island's Government Development Bank (GDB), bringing the defunct fiscal agent a step closer to settling more than $5 billion in debt, Reuters reported on Friday. The oversight board, appointed by federal lawmakers to steer Puerto Rico through a historic crisis, said in a joint statement with government leaders that it endorsed the plan to restructure GDB debts under Title VI of PROMESA, a federal Puerto Rico rescue law passed by the U.S. Congress last year. GDB officials lauded the deal, which will split GDB's assets among depositors and lenders in an effort to avoid a protracted bankruptcy. Once the primary fiscal agent for Puerto Rico, in charge of holding deposits from government agencies and municipalities, GDB has been a shell entity since the U.S. territory's former governor declared a state of emergency in April 2016. Its wind-down could mean losses of as much as 45 percent for some bondholders. Read more. 

For updated news and analysis of Puerto Rico's debt crisis, along with current docket filings in Puerto Rico's case, be sure to visit ABI's "Puerto Rico in Distress" webpage.

A group of hedge funds that owns $3.3 billion of Puerto Rico bonds disclosed in court documents the amount that each of them holds, Bloomberg News reported yesterday. The disclosure is related to the territory’s May 3 bankruptcy, which will allow Puerto Rico and its agencies to reduce the $74 billion of debt left after years of economic decline and borrowing to cover operating expenses. The group includes distressed-debt buyers and municipal mutual fund Franklin Mutual Advisers LLC. The group claims that general-obligation bonds must be paid before other types of Puerto Rico debt because the island’s constitution gives those securities the highest claim to the government’s cash. The group wants Puerto Rico’s sales-tax revenue to help repay general-obligation debt. The island sold sales-tax bonds backed by that revenue stream. Click here to view the full list. 

For updated news and analysis of Puerto Rico's debt crisis, along with current docket filings in Puerto Rico's case, be sure to visit ABI's "Puerto Rico in Distress" webpage.

Congress has not formally recognized Puerto Rico’s vote for statehood, but that isn’t stopping the territory’s political leaders from gearing up for a Capitol Hill clash with plans to dispatch representatives to Washington, D.C., FoxNews.com reported.  Gov. Ricardo Rosselló on Monday began naming those representatives — a list that eventually will include two senators and five congressmen – with the intent of seating them in Congress. The move stems from a law he signed on June 5 known as the “Equality Plan,” which calls for Puerto Rico to send representatives to Congress. The candidates would need approval from Puerto Rico’s legislature and would have to be bilingual residents of the island as well as U.S. citizens.

Assured Guaranty is suing Puerto Rico’s federal Oversight Board over its decision to push the Caribbean island’s electric utility into bankruptcy, the Royal Gazette reported. The Bermuda-based firm insures some of the bonds issued by PREPA, as the utility is known, and the bankruptcy comes after the rejection of a longstanding debt-restructuring agreement with creditors. It marks the end of nearly four years of negotiations between PREPA, hedge funds, mutual funds and bond-insurance companies, including Assured, to find an out-of-court solution to reduce the agency’s obligations and modernize its system. Read more. 

For updated news and analysis of Puerto Rico's debt crisis, along with current docket filings in Puerto Rico's case, be sure to visit ABI's "Puerto Rico in Distress" webpage.

The Puerto Rico power utility PREPA, laden with a $9 billion debt load, has filed for a form of bankruptcy, Puerto Rico's primary fiscal agent said yesterday, Reuters reported. The Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF) said that PREPA power had filed in the U.S. District Court of Puerto Rico for protection under Title III of the 2016 Puerto Rico rescue law known as PROMESA, which gave Puerto Rico and its agencies access to a workout process akin to U.S. bankruptcy. PROMESA was created to help Puerto Rico emerge from a crisis marked by $72 billion in debt, a 45 percent poverty rate on the island and insolvent public pensions. Some public entities, including Puerto Rico's central government itself, have already filed Title III cases. Puerto Rico's seven-member financial oversight board created under PROMESA had unanimously authorized a bankruptcy filing at a public meeting in San Juan on Friday, granting a request by Governor Ricardo Rossello. The filing comes after nearly three years of restructuring talks between the utility and its creditors, and the unraveling of two separate deals. Read more. 

For updated news and analysis of Puerto Rico's debt crisis, along with current docket filings in Puerto Rico's case, be sure to visit ABI's "Puerto Rico in Distress" webpage.