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Puerto Rico has been anxious for Congress to address its $70 billion debt crisis, but the island’s leaders may not be as happy with the potential outcome as the investors holding its securities, Bloomberg News reported today. Driving the process are Republicans, who control both chambers and say that the island has proved it’s not able to manage its finances and needs an external authority to ensure it cuts expenses and deficits. Democrats, essential to passing a bill in Senate, insist on giving Puerto Rico access to an orderly, court-supervised process allowing it to cut its debt. “What may pass may be a mixture of both, possibly a control board with some sort of restructuring access, some leeway in allowing them to restructure some of their debt,” said Shaun Burgess, a portfolio manager at Cumberland Advisors Inc. in Sarasota, Fla. “The island needs some real management and structural help and not just the ability to cram down or restructure their debt.” Read more.

In related news, Sen. Elizabeth Warren (D-Mass.) is tying a long-brewing battle over the Puerto Rico financial crisis to an energy bill currently before the Senate, The Hill reported today. The Massachusetts Democrat is offering an amendment to a wide-ranging energy reform bill from Sen. Lisa Murkowski (R-Alaska). Warren's proposal would help temporarily protect Puerto Rico from debt collectors until April 1. Democratic Sens. Richard Blumenthal (Conn.), Kirsten Gillibrand (N.Y.) Bob Menendez (N.J.), Chris Murphy (Conn.), Bill Nelson (Fla.) and Charles Schumer (N.Y.) are backing Warren's amendment. The senators argue that "a temporary stay on litigation is essential to facilitate an orderly process for stabilizing, evaluating, and comprehensively resolving" Puerto Rico's crisis. A vote on the amendment hasn't been scheduled, but trying to link the two issues would place a deeply partisan fight into an otherwise uncontroversial energy bill. Read more. 

Additionally, the House Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs will hold a hearing tomorrow at 11 a.m. ET titled “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.”

Experts gather this week San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium. Click here to register! 

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

Puerto Rico plans to propose a debt exchange to investors today, offering to swap existing bonds for two new types of securities to help the U.S. commonwealth alleviate its debt burden, the Wall Street Journal reported today. Both classes of debt would delay payments, allowing Puerto Rico time to make fiscal adjustments and spur economic growth: One would eventually pay interest at 5 percent, while the other would carry a value determined by the island’s fiscal health. Bondholders would be offered the first class of debt in amounts based on the relative legal priority of their holdings. Investors would then receive enough of the second class to make up the difference between that amount and the face value of their bonds. The first class would have interest payments beginning in 2018, rising to 5 percent in 2021, and principal due starting in five years. Payments on the second class could begin in 10 years, with creditors receiving up to 25 percent annually of commonwealth revenue that exceeds current projections. Read more. (Subscription required.) 

In related news, the House Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs will hold a hearing on Tuesday at 11 a.m. ET titled “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.”

Experts gather next week San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium. Click here to register! 

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

A deal to restructure Puerto Rico's debt-laden power utility, PREPA, received new life late on Wednesday after the agency and bondholders agreed to extend a crucial deadline, Reuters reported yesterday. Righting PREPA's ship is seen as a key step in fixing Puerto Rico, which faces $70 billion of debt, a 45 percent poverty rate and a shrinking tax base as residents increasingly jump ship for the mainland United States. PREPA, with more than $8 billion in debt, had reached a restructuring deal in December with about 70 percent of its creditors, but the deal needed legislation to pass by Jan. 22 to become effective. When Puerto Rico's lawmakers failed to meet that deadline, PREPA's largest bondholder group offered an extension, but PREPA rejected it, casting doubt on an agreement that had been 18 months in the making. PREPA announced yesterday that the agency and creditors had come to terms on an extension through Feb. 16, providing breathing room for lawmakers still debating tweaks to legislation. Read more. 

In related news, Senate Democrats yesterday sent a letter to Majority Leader Mitch McConnell calling for congressional action on Puerto Rico, demanding that legislation to resolve the island's financial crisis include tools to restructure debt, Reuters reported. "Restructuring legislation would not cost the federal government a single penny and would instead save U.S. taxpayers from the growing cost of inaction," said the letter to the Senate's Republican leader, signed by all 46 Democrats and independents. The letter is a challenge to Republicans who largely oppose letting the U.S. commonwealth restructure debt. Republican Sens. Orrin Hatch (Utah), Lisa Murkowski (Alaska) and Chuck Grassley (Iowa) last month introduced a bill to bring Puerto Rico's finances under federal oversight without providing for debt restructuring. Click here to read the letter. 

Additionally, the House Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs will hold a hearing on Tuesday at 11 a.m. ET titled “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.” Witnesses to be announced. 

Experts gather next week San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium. Click here to register! 

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

Puerto Rico has scheduled meetings Friday with representatives of several bondholder groups to discuss a possible restructuring of $70 billion of municipal bonds, the Wall Street Journal reported today. The meetings come as Puerto Rico struggles to make progress on two tracks, striking deals with bondholders and persuading U.S. legislators that the island merits relief from the U.S. government. Further complicating the process, the U.S. territory has more than a dozen types of bonds and is negotiating simultaneously with several creditor groups that have competing claims. Puerto Rico missed about $37 million of debt payments in January, while a tentative agreement expired between bondholders and the Puerto Rico Electric Power Authority. The government raised estimates of its financing gap by 15 percent last week, which investors expect will increase the losses Puerto Rico will push them to accept in a restructuring. Read more. (Subscription required.) 

In related news, the House Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs will hold a hearing on Tuesday at 11 a.m. ET titled “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.” Witnesses to be announced. 

Experts gather next week San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium. Click here to register! 

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

A U.S. federal judge said yesterday that a second lawsuit over Puerto Rico's debt default will be joined with a similar suit in order to save time and money and avoid inconsistent rulings, Reuters reported. Financial Guaranty Insurance Co., or FGIC, sued Puerto Rico on Tuesday for diverting $164 million in revenue streams meant to pay the island's debt. The lawsuit mirrored one brought earlier this month by two other bond insurers, Assured Guaranty and Ambac Financial, which argues that the clawbacks violate the U.S. Constitution. The cases, both filed in U.S. federal court in Puerto Rico, are the first against Puerto Rico since Governor Alejandro Garcia Padilla called the U.S. territory's $70 billion debt load "unpayable" last June. The governor has said the only way to afford to pay debt backed by Puerto Rico's constitution was to clawback revenues earmarked for debt at other agencies. Read more.

In related news, the House Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs will hold a hearing on Tuesday at 11 a.m. ET titled “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.” Witnesses to be announced. 

Join experts in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium, Feb. 4-6, 2016. Click here to register! 

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

On his first official visit to the Puerto Rico, Treasury Secretary Jacob J. Lew said the financial crisis on the island was deepening and he urged Congress to act quickly to give the government the power it needs to restructure all of its debt, the New York Times reported today. “The people of Puerto Rico are sacrificing,” Lew said. “But unless that sacrifice is shared by creditors in an orderly restructuring, there is no path out of insolvency and back to growth.” He met with Gov. Alejandro García Padilla and senior Puerto Rican legislators, as well as leaders from business, labor and civic groups. Lew said that he believed there was still time to restore growth on the island, but the longer the restructuring process took, the harder it would be for the island to recover. Read more. 

Join experts in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium, Feb. 4-6, 2016. Click here to register! 

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

Four months after announcing a grueling five-year plan for reducing the island’s vast debt and reviving economic growth, Puerto Rico’s top economic officials said yesterday that they had been too optimistic and revised the plan for the worse, the New York Times reported today. When the government first released its five-year plan last September, it warned creditors that it would need $14 billion of debt relief over that period, because it did not have enough money to pay them the total amount due, $28 billion. Officials said yesterday that they now expected to need a $16 billion break from creditors. The officials said they had run updated forecasts for 10 years as well, and things did not get much better. Over the full 10 years, they said, they would need $24 billion worth of reductions in the total $63 billion in principal and interest that various branches of government owed creditors. Read more. 

Join experts in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium, Feb. 4-6, 2016. Click here to register! 

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

The CEO of one of Puerto Rico's largest insurers fired back at his critics, talking about the decision to sue Puerto Rico after its recent debt default, and warning of the "dreadful" impact that granting the commonwealth access to U.S. bankruptcy laws could have on its citizens and the broader markets, CNBC.com reported yesterday. Puerto Rico's senior officials have been desperately asking U.S. lawmakers to grant the island access to chapter 9 bankruptcy protection in order to restructure its some $70 billion in outstanding debt — a move that Ambac CEO Nader Tavakoli maintains is misguided. Alejandro García Padilla, the governor of the commonwealth, as well as Puerto Rico's bankruptcy professionals and public relations experts are placing all their bets on getting chapter 9 access, Tavakoli said. Calling that path "dreadful" and "a horrible idea for the people of Puerto Rico," Tavakoli says that a chapter 9 filing would lead to lengthy litigation and hundreds of millions of dollars in incremental expenses. He maintains that it would also put the island's integrity and ability to access capital markets in the future on the line. Read more. 

Join experts in San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium, Feb. 4-6, 2016. Click here to register! 

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