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Sens. Orrin Hatch (Utah) and Marco Rubio (Fla.) will be Senate Republicans’ representatives on a bicameral task force charged with coming up with methods to help Puerto Rico emerge from its debt crisis, MorningConsult.com reported on Frday. Rep. Nydia Velázquez (D-N.Y.) and Puerto Rico’s non-voting representative in Congress, Pedro Pierluisi, will represent House Democrats. Senate Majority Leader Mitch McConnell (R-Ky.) on Friday appointed the two senators to the task force, which is separate from the fiscal oversight board established by the recently passed law to address the island’s debt crisis. Senate Minority Leader Harry Reid announced last week his appointment of Sens. Bill Nelson (Fla.) and Robert Menendez (N.J.) to the task force. President Obama on June 30 signed into law the Puerto Rico Oversight, Management and Economic Stability Act, also known as PROMESA. The congressional task force it established is required to complete a report on the causes and possible solutions to the crisis by the end of 2017. House Speaker Paul Ryan on Friday appointed Rep. Sean Duffy (R-Wis.), the bill’s lead sponsor, and Rep. Tom MacArthur (R-N.J.). Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Puerto Rico hired Public Financial Management Inc. to serve as the commonwealth’s adviser on capital financing transactions, Bloomberg News reported yesterday. Terms of the agreement weren’t disclosed, but the Puerto Rico Fiscal Agency and Financial Advisory Authority said that the Philadelphia-based firm will assist the island and its various utilities and agencies on pricing and execution of borrowings through June 2017. The authority serves as the commonwealth’s fiscal agent after Governor Alejandro García Padilla in April placed the Government Development Bank in an emergency period as the bank’s liquidity diminished. PFM served as a financial adviser to the GDB from July 2014 through June 30, 2016, according to Puerto Rico’s Office of the Comptroller. Two contracts for that period total $1.3 million, according to the documents. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Puerto Rico Governor Alejandro García Padilla suggested yesterday that the commonwealth’s central government may not be able to borrow from the $3.7 trillion municipal bond market any time soon, as the uncertainty of restructuring the island’s $70 billion debt and its continuing recession weigh on its shrinking population, MarketWatch.com reported. “I think it would take a couple of years, maybe two years for the bond market to open to Puerto Rico if we do the right thing,” García Padilla said yesterday. The governor, not running for re-election in November, said that for Puerto Rico’s economy to grow, the White House needs to give Puerto Ricans a larger share of benefits from Medicare and Medicaid. He also said that Congress needs to grant new corporate incentives to the island similar to the now expired Section 936 of the tax code, which exempted U.S. companies from paying federal tax with revenue originated from U.S. territories, including Puerto Rico. President Barack Obama signed a bill on June 30 to create a seven-member federal board to oversee the commonwealth’s finances, restructure its $70 billion debt, and shield the island from creditor lawsuits. Puerto Rico defaulted on July 1 on about half of the $2 billion bond payments due. Puerto Rico cannot file for bankruptcy protection under current law. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

The Puerto Rico Aqueduct & Sewer Authority wants to issue the debt through a new agency to finance construction work delayed by the government’s fiscal crisis, Bloomberg News reported yesterday. Though the commonwealth just defaulted on about $1 billion due to bondholders, the agency would give investors first claim on revenue it collects from water and sewer bills, according to Efrain Acosta, the director of finance for the utility. It may also exchange an additional $1.1 billion of securities for its outstanding bonds to investors willing to accept less than they’re owed. “The market is tough at this moment,” Acosta said in an interview. “But we have to go forward with our plan and see if we can get new money to pay our contractors and try to restart our construction plan.” Puerto Rico faces considerable obstacles, even in a market where rock-bottom yields have left buyers willing to take on more risk for bigger returns. The U.S. territory hasn’t sold bonds since it borrowed $3.5 billion in March 2014, a deal that was supposed to give it time to arrest the financial decline, and a planned $750 million offering by the water utility last year was subsequently shelved. Moreover, it’s unclear how a federal oversight board, which hasn’t been appointed yet, will treat bondholders as the island seeks to cut its debt. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

U.S. District Court Judge Francisco Besosa declined Friday notices of automatic stay filed by Puerto Rico to freeze lawsuits filed by a bondholders group and three firms to invalidate the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act, Caribbean Business reported on Saturday. The commonwealth filed the stay notices for lawsuits filed by National Public Finance Guarantee Corp., Ambac Assurance Corp., Brigade Leveraged Capital Structures and Trigo v. García Padilla against various agencies. The notices were also filed Friday. Judge Besosa ordered the plaintiffs to respond to the notice no later than July 18. “At this time, without the benefit of full briefing by the parties, the Court will not acknowledge that this litigation has been temporarily stayed by the [Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)],” the judge said in the responses. On June 30, President Obama enacted PROMESA, which puts a temporary moratorium on debt-related litigation against the commonwealth until at least Feb. 15. The plaintiffs are seeking payment alleging that the Moratorium Act violated contractual obligations and is the equivalent of a local bankruptcy law, which is prohibited. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Puerto Rico on Friday defaulted on $779 million in general obligation bonds, and while the default is no surprise given the island’s financial woes, it’s still bad news, and has led to a downgrade from Fitch Ratings, Barron’s reported today. The credit rating agency cut Puerto Rico’s Long-Term Issuer Default Rating (IDR) to “RD” from “C” and general obligation (GO) bond rating to “D” from “C” after the default on Friday. Fitch had put Puerto Rico on ratings watch in anticipation of a downgrade in case of default, and after today’s action it’s been removed. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Three major bond insurers are bracing for the possibility of a historic payout if Puerto Rico defaults on debt due today, the Wall Street Journal reported. Puerto Rico Gov. Alejandro García Padilla yesterday reiterated statements that the commonwealth cannot afford to make the payment and cited an April law that allows Puerto Rico to temporarily stop paying bond debt. García Padilla has long said that the island would not be able cover the July 1 payment of nearly $2 billion. That could trigger as much as hundreds of millions in payments from insurers Ambac Financial Group, National Public Finance Guarantee Corp. and Assured Guaranty Ltd. to cover principal and interest, in what would be the biggest insurer payout to date in Puerto Rico. It isn’t yet known how likely this worst-case scenario is since it is unclear just how much the insurers will have to pay. In some cases, the reserve funds set aside by Puerto Rico could cover payments. Analysts said the ultimate impact will be limited because all three insurers have money set aside for such claims and their share prices have already suffered because of Puerto Rico’s troubles. Insurers also agree to pay only the amount due on the day it is due, not to accelerate payment on the defaulted bonds. Read more. (Subscription required.) 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Having already defaulted multiple times over the past several months, the Puerto Rico faces more debt per capita than any U.S. state, according to a commentary on Realclearpolitics.com. While the average debt to GDP ratio of the fifty states is 7.2 percent, Puerto Rico’s is approximately 70 percent as the territory grapples with a 45 percent poverty rate and an economy that has shrunk by 10 percent over the past decade. Some have fomented a simplistic narrative that pits Puerto Rico’s government versus “greedy” hedge funds. But this neglects not only the direct impact on the 9 million Americans who have a portion of their retirement savings invested in the island’s bonds, but also the detrimental impact on Puerto Rico’s economic future — and broader consequences for borrowing costs across the country, according to the commentary.