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Last week, the Obama administration doubled down on efforts to aid Puerto Rico by proposing to change American law to allow the territory and its municipalities to seek bankruptcy protection, according to a commentary in The City Journal. The “Roadmap for Congressional Action” on Puerto Rico seems more calculated to embarrass Republicans than to find an actual solution to the deeply indebted island’s problems, according to the commentary. Republicans had serious concerns about previous Puerto Rico bailout proposals. Instead of dismissing it, Republicans should demand more substantial concessions on union-friendly federal policies that have helped deep-six Puerto Rico’s economy, according to the commentary. Read more. 

In related news, a group of investors holding Puerto Rico’s general-obligation bonds have hired restructuring adviser Goldin Associates LLC to represent them as the commonwealth seeks to reduce its debt burden, Bloomberg News reported yesterday. Goldin Associates will advise the general-obligation group in debt discussions. Puerto Rico and advisers to groups holding the island’s various bonds are set to meet today at Cleary Gottlieb Steen & Hamilton LLP’s New York office to discuss the island’s projected liquidity. The law firm has been representing the commonwealth in its plan to reduce its debt obligations. The general obligation bondholder group splintered from a broader coalition of more than three dozen firms that held $5.2 billion of Puerto Rico debt. Puerto Rico has $13 billion of general obligation debt which its constitution stipulates must be repaid before other expenses. The next payment to bondholders is $357 million of interest, due Jan. 1. Read more. 

For more on Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage. 

Standard & Poor's on Friday maintained its “CC” rating on $47.5 billion of tax-backed Puerto Rican bonds, reflecting a negative outlook after the U.S. Treasury Department pushed Congress to pass laws to address the island's economic crisis, Reuters reported on Friday. The U.S. commonwealth, facing $72 billion in debt, has said that it could run out of cash by next June, and some analysts believe it will default as early as Dec. 1, when it owes a $355 million payment. Treasury's proposal, the Obama administration's first public directive on how to address the U.S. territory's problems, would allow the Puerto Rican government to file for bankruptcy, improve its Medicaid and Medicare funding levels, and extend earned income and child tax credits to the island. In a Friday statement, S&P said its rating "reflects our view that a default is highly likely, with or without enactment of this proposal." Read more. 

A messy Puerto Rico default is in nobody’s interest, which is why Congress ought to move swiftly to provide the American territory with a way to restructure its huge debt and revive its economy, according to a New York Times editorial yesterday. The Obama administration last week offered the outline of a rescue plan to help the island and the 3.5 million American citizens who live there. The plan would impose new oversight on the island’s finances and expand access to government programs like Medicaid and the earned-income tax credit. Crucially, it asks Congress to change the law so that Puerto Rico’s territorial government and its municipalities can seek bankruptcy protection. What investors must realize is that an orderly restructuring is a far better alternative than the long and complex legal battles that would inevitably follow a sudden default, according to the editorial. And if, in addition to reworking the bankruptcy law, Congress also created an oversight board, as the Obama administration recommends, investors could have some confidence that Puerto Rico’s politicians would make needed policy changes. Read the full editorial. 

For more news and analysis on Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage. 

An Obama administration proposal aimed at stemming Puerto Rico’s spiraling fiscal crisis received a lukewarm reception before a hearing of the Senate Energy and Natural Resources Committee yesterday, with some Republicans asking for better data on the problem and some Democrats calling on the administration to show more ingenuity and urgency to solve it, the Washington Post reported yesterday. Speaking at a Senate hearing on the growing effect of the commonwealth’s economic crunch, a top Treasury Department official warned that the island’s debt crisis is morphing into a humanitarian one. “In the very near future, Puerto Rico will face impossible choices among providing essential public services, delivering promised pension benefits and paying its debt,” Antonio Weiss, the Treasury Department’s point person on Puerto Rico, told the Senate Committee on Energy and Natural Resources on Thursday. Weiss outlined a series of actions that the administration wanted Congress to consider to help Puerto Rico, which has been suffering through a decade-long recession and is buried under $73 billion in debt. He said lawmakers should create a new class of bankruptcy only available to U.S. territories that would allow Puerto Rico to restructure all of its debt. Sen. Lisa Murkowski (R­-Alaska), the committee’s chairman, said that she was sympathetic to Puerto Rico’s plight but needs verifiable numbers about the island’s finances before she can help craft a solution. Puerto Rico has not produced an audited financial statement in two years and, she said, other financial reports have come up with widely varying numbers for the island’s debt-service costs. Read more.

In related news, Puerto Rico officials have called a meeting next week with advisers to some of the island’s bondholders after the Obama administration pressed Congress to give the U.S. territory a boost in its debt-restructuring negotiations, Bloomberg News reported yesterday. Investment banks representing several sets of creditors have been invited to meet the restructuring officials on Tuesday at the New York office of Cleary Gottlieb Steen & Hamilton LLP, the law firm representing Puerto Rico in its debt-reduction efforts. The planned meeting follows a proposal released on Wednesday by the U.S. Treasury Department and two other federal agencies that calls for giving the commonwealth unprecedented authority in restructuring its $73 billion debt burden through bankruptcy protection. The plan has drawn criticism, with some participants in the municipal bond market referring to the powers Puerto Rico would get as "Super Chapter 9" because the island would be allowed to file for bankruptcy protection while U.S. states are not. Read more.

For the latest news and analysis on Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage. 

With Puerto Rico buried in debt and on course to completely run out of money by the end of the year, the Obama administration is urging Congress to take unprecedented action to help the island, including granting a type of bankruptcy protection unavailable to the nation’s 50 states, the Washington Post reported today. The administration said that the broader bankruptcy protection, which would be available only to territories but not fiscally pressed states, is needed to help Puerto Rico avert a mushrooming crisis and restructure its $73 billion in debt. In addition to urging Congress to offer Puerto Rico this new type of bankruptcy protection, the administration is also recommending that Congress broaden access to the island’s Medicaid program, a move that would pump money into its teetering health care system. Finally, the administration said, Congress should install a control board to oversee the island’s finances­ and ensure that they are being handled in a responsible and transparent manner. The proposal comes in advance of a Senate Energy and Natural Resources Committee hearing today looking at Puerto Rico’s debt crisis. Read more. 

To read the Obama administration’s proposal, please click here. 

Rep. Pedro Pierluisi is set to testify at today’s hearing. For his statement on the Obama administration’s proposal, please click here.  Rep. Pierluisi is the invited keynote speaker for ABI's Winter Leadership Conference. Click here for more information and to register.

For more information on today’s Senate Energy and Natural Resources hearing at 10 a.m. ET, please click here. 

In related news, Puerto Rico’s Government Development Bank said that talks with a group of bondholders over a restructuring of the agency’s debt and potential financing have ended after they failed to reach an agreement, Bloomberg News reported yesterday. The development bank, which is closely tied to other government borrowers because it acts as a lender to the commonwealth and its localities, said in an e-mailed statement yesterday that it continues to focus on a broader restructuring that would allow bondholders to voluntarily exchange their securities for new ones. Read more.

For the latest news and analysis of Puerto Rico’s ongoing debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage. 

Puerto Rico legislators are warning that they will seek amendments to a bill that would create an independent fiscal control board as the U.S. territory pushes to restructure a portion of its $72 billion of public debt before the government runs out of money, the Associated Press reported yesterday. The territory’s lawmakers said on Monday that they expect to hold five days of public hearings before voting on the 71-page measure, submitted late last week. Most of the debate will likely focus on what kind of power and reach the board should have as concerns grow about whether the government would lose significant control over its finances and operations. "This project is an admission that the markets and U.S. institutions have absolutely no confidence in this government," said Sen. Maria de Lourdes Santiago. "This board would not supervise. It would govern." The proposed board is part of a five-year fiscal reform plan aimed at strengthening the island's economy, which has tanked for nearly a decade amid concern that public agencies might soon go bankrupt. Read more. 

The Senate Energy and Natural Resources Committee will hold a hearing on Thursday at 10 a.m. ET to receive testimony on Puerto Rico's economy, debt, and options for Congress moving forward. Read more. 

For the latest news and analysis of Puerto Rico’s financial crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage. 

A group of investors that hold the bonds of Puerto Rico’s water utility have hired investment bank Greenhill & Co. to help negotiate terms for new financing, Bloomberg News reported yesterday. The investors have discussed a plan that would create new senior debt for the Puerto Rico Aqueduct & Sewer Authority that is given higher priority than other agency borrowings. The bondholders may use a partial debt restructuring as a condition for backing the deal. The investors are seeking to inject fresh capital into the struggling water utility, known by the Spanish acronym Prasa, because it failed to sell $750 million of bonds with an average interest rate of 10 percent in August and September. Read more. 

The Senate Energy and Natural Resources Committee will hold a hearing on Thursday at 10 a.m. ET to receive testimony on Puerto Rico's economy, debt, and options for Congress moving forward. Read more. 

For the latest news and analysis of Puerto Rico’s financial crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage. 

The Senate Energy and Natural Resources Committee will hold a hearing on Thursday at 10 a.m. ET to receive testimony on Puerto Rico's economy, debt, and options for Congress moving forward. More information on witnesses and prepared testimony forthcoming.

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

Puerto Rico bond prices suggest that investors are doubtful of a proposal being floated that would have the U.S. Treasury assist the commonwealth in the restructuring of its debt, Bloomberg News reported yesterday. General obligations maturing July 2035, the most actively-traded Puerto Rico securities in the last three months and originally sold at 93 cents on the dollar, changed hands at an average price of 74.7 cents, little changed from Wednesday, data compiled by Bloomberg show. Trades of at least $1 million on taxable pension bonds maturing July 2038 show that the bonds changed hands Thursday at an average price of 30.5 cents, up from 25 cents on Tuesday, Bloomberg data show. “It’s still in its infancy, so you can’t get too excited about it as a bond investor,” said Gary Pollack, who manages $6 billion of municipal debt, including Puerto Rico bonds, as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York. Puerto Rico and federal officials are discussing the possible issuance of new bonds administered by the Treasury to help restructure the commonwealth’s debt, with federal officials overseeing a portion of the island’s tax collections that would be used to repay the securities. Read more.

For the latest news and analysis on Puerto Rico's Debt Crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.

Puerto Rico and U.S. officials are discussing the issuance of a “superbond” possibly administered by the U.S. Treasury Department that would help restructure the commonwealth’s $72 billion of debt, the Wall Street Journal reported today. Under the plan, the Treasury or a designated third party would administer an account holding at least some of the island’s tax collections. Funds in the account would be used to pay holders of the superbond, which would be issued to existing Puerto Rico bondholders in exchange for outstanding debt at a negotiated ratio. Investors would receive less debt, likely taking an effective “haircut” on the value of their holdings, but would have higher expectations for getting repaid. The proposal would mark an important change in Puerto Rico’s relationship with the U.S. government, which has resisted wading into the island’s debt morass. A superbond would need to clear high political hurdles in Washington, D.C., and Puerto Rico to become a reality. Discussions with bondholders over the size of any haircut could present further challenges to reaching a deal. Read more. (Subscription required.) 

For the latest developments on Puerto Rico’s debt crisis, be sure to visit ABI’s “Puerto Rico in Distress” webpage.