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Puerto Rico's Stalled Electric Deal Shows Long Path to Shed Debt
Even before Puerto Rico moves to restructure its $70 billion of debt, the trial run with its electric utility is showing just how hard that will be, Bloomberg News reported yesterday. It took more than a year of fitful negotiations for the Puerto Rico Electric Power Authority (PREPA) to strike a deal with bondholders, who in November agreed to take losses of 15 percent. The utility is still in talks with MBIA Inc., Assured Guaranty Ltd. and Syncora Guarantee Inc., which insure some of its $8 billion of debt against default. And officials are bumping up against another hurdle: The agreement could unravel if island lawmakers don't pass needed legislation by Dec. 7. 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.
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Obama Administration Targets "Unbanked" Households in New Initiative
The Obama administration launched a new initiative this week to boost banking access for millions of Americans who don't currently have checking or savings accounts, the Wall Street Journal reported yesterday. The Treasury Department announced plans to partner with nonprofits and companies such JPMorgan Chase & Co., PayPal Holdings Inc., Coca-Cola and the Gates Foundation to reach low-income and other underserved populations in the U.S. and emerging countries through a series of pilot programs, grants and other initiatives. In the U.S., some 26 million consumers didn't have enough of a financial history in 2010 to get a credit score, Treasury Secretary Jacob Lew said, meaning that paying rent and utility bills on time wouldn't be sufficient to gain access to credit. He also said more attention was needed to help boost Americans' inadequate retirement and rainy-day savings.
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Recent Defaults Show Private Colleges Are Struggling
Moody's estimates that the pace of small college closures will triple to 15 a year by 2017, leaving bondholders at risk of seeing their investments disappear along with the school, Bloomberg News reported on Monday. Emmanuel College, an 800-student Christian school in Franklin Springs, Ga., failed this month to pay investors holding $25 million of bonds. It joins Dowling College, which this year became the first municipal-bond-market borrower rated by Moody's Investors Service to default since 2013. Colleges are struggling to increase tuition as the pool of graduating high school seniors is shrinking and students are balking at taking on costly loans. That disproportionately affects small, private colleges that rely heavily on tuition -- instead of endowments -- and have fewer students to bear the costs, said Edith Behr, an analyst with Moody's. For the second straight year, tuition revenue will drop for about 30 percent of private universities, according to the credit-rating company.
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Commentary: How the Fed Protected Its Bailout Powers
The Federal Reserve on Monday managed to thread the needle on its emergency-lending powers, acknowledging legally mandated limits while preserving flexibility, according to a commentary in Tuesday's Wall Street Journal. The upshot: Banks will likely be able to rely on the Fed to provide relief in a crisis. In addition, a new rule approved by the Fed may accelerate the creation of emergency-lending facilities, although banks could pay a price for this. The Dodd-Frank Act sought to curtail the Fed's discretion in making emergency loans in two ways. First, it forbid loan facilities directed at specific firms or a number of specific failing firms, requiring rescue funds be limited to "broad-based." That rules out the targeted lending the Fed undertook in its rescue of AIG and related to the sale of Bear Stearns to JPMorgan Chase. Second, the law prohibited lending to insolvent firms. Apart from those in bankruptcy or undergoing resolution, though, the definition of insolvency was left largely to the Fed. The Fed's final rule implementing these limits preserves a lot of its discretion.
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Author Discusses How Creditors' Committee Participation in Chapter 11 Has Changed over Past 10 Years
The latest ABI podcast features ABI Deputy Executive Director Amy Quackenboss talking with Joseph Bodoff of Rubin and Rudman LLP about his new book, Creditors' Committee Manual, Sixth Edition. Bodoff discusses how the participation of unsecured creditors' committees in chapter 11 cases has changed over the past 10 years, leading to the updated edition of the Manual. Click here to listen to the podcast.
To purchase the Creditors' Committee Manual, Sixth Edition from the ABI Bookstore for the special price of $10, please click here. (Be sure to log into the website first to get the ABI member price)
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Watch Experts Discuss Why the CFPB Is the Most Powerful Government Agency in the Consumer Debt Industry
If you're in the business of consumer credit, finance, debt collection, etc., learn why the Consumer Financial Protection Bureau is considered the most powerful consumer debt industry-related agency in the government. Click here to watch ABI's Sam Gerdano interview Alane Becket of Becket & Lee LLP (Malvern, Pa.) and Joanne Needleman of Clark Hill PLC (Philadelphia) about the CFPB.
Becket is also a co-author of the lead article of the December ABI Journal, titled "What Is the CFPB, and Why Should You Care?" Click here to read the article.
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USTP Announces Notice of Public Hearing and Reopened Comment Period for Proposed Procedures for Completing Uniform Periodic Reports in Non-Small Business Cases Filed Under Chapter 11 of Title 11
The U.S. Trustee Program (USTP) on Nov. 10 published in the Federal Register a notice of proposed rulemaking (NPRM) seeking public comment on the proposed rules requiring uniform periodic reports by debtors-in-possession or trustees in non-small business cases under chapter 11 and the proposed periodic report forms. After analyzing the comments to the NPRM and proposed forms, and because certain public commenters asked to meet with representatives of the USTP to discuss the NPRM and proposed forms, the USTP decided to hold a public hearing on Feb. 17, 2016, from 10:00 a.m. to 1:00 p.m. ET in the Executive Conference Center in the Executive Office for U.S. Trustees in Washington, DC. The hearing on the NPRM will provide an opportunity for interested parties to express their views directly to USTP officials. The USTP has also reopened the comment period and will accept new and supplemental comments from the public on or before Feb. 22, 2016, via www.regulations.gov. Those who register to attend and make a presentation at the public hearing must have either a written comment or statement on file by the registration deadline of Jan. 6, 2016. For more information, please click here.
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