Economy Puerto Rico in Bankruptcy: Oversight Board Proposes To Screw Bondholders In Favor of Pensioners

[Gandhi]

The alternative to this is free stuff for a different group of people. PR bonds paid very high interest rates as a result of the high perceived risk. Companies that invested in PR debt did very well as a result, but now people want to say that they shouldn't be allowed to default, and thus that the gov't should ensure high risk-free returns to some investors. Fuck that shit.

They should be allowed to go into a BK process.

 

[Gandhi]

I'm confused. You want them to declare bankruptcy again while they're still in the previous one from last May?

http://forums.sherdog.com/posts/129658373/

Yes

 

[panamaican]

Sure if they were allowed to

I meant that this bill bascially reproduces bankruptcy at the territorial level. Meet criteria, wipe part of the debt. Assets (put up the government here) allocated to the creditors based on secondary criteria. PR still responsible for the remaining debt.

As an approach to dealing with a debt laden entity, it's a very straightforward and common approach.

But the tone of the OP was that this was some massive error in judgment. So my question, better stated, is "Is there a better way to deal with an overextended sovereign entity than an approach that fairly approximates the time tested methods applied in most bankruptcy proceedings?"

 

[Gandhi]

I meant that this bill bascially reproduces bankruptcy at the territorial level. Meet criteria, wipe part of the debt. Assets (put up the government here) allocated to the creditors based on secondary criteria. PR still responsible for the remaining debt.

As an approach to dealing with a debt laden entity, it's a very straightforward and common approach.

But the tone of the OP was that this was some massive error in judgment. So my question, better stated, is "Is there a better way to deal with an overextended sovereign entity than an approach that fairly approximates the time tested methods applied in most bankruptcy proceedings?"

PR should be working to reduce the debt to a very manageable level without totally annihilating the lender. If you do that, it cripples the ability to borrow in the future. It should be like a formal municipal BK process, like say Detroit. Having said that, @Arkain2K is correct that you need to look at the future or we will just be back in the same spot. So some sort of political reform is needed or we are going to have mini Venezualas under the US flag.

 

[franklinstower]

Take that! Investors Capitalist Pigs! That's what you get for investing in a junk bond with sky-high interest rates!

On the other hand: Near-total debt forgiveness, with no attached demand/conditions on political and economic reforms to fix the underlying issues plaguing the island for decades now. That oughtta teach the Puerto Rican government and people how to be responsible, finally!

Senators Warren, Sanders, Gillibrand, Markey, Harris introduce bill that would slash Puerto Rico's $74 Billion debt
By Dawn Giel | 25 July 2018

Sens. Elizabeth Warren and Bernie Sanders on Wednesday introduced a bill that would essentially wipe out tens of billions of dollars of Puerto Rico’s $73 billion in outstanding debt.

The proposal, entitled the “U.S. Territorial Relief Act of 2018,” counts Democratic Sens. Kirsten Gillibrand of New York, Edward J. Markey of Massachusetts and Kamala Harris of California as co-sponsors. The bill “provides an avenue to comprehensive debt relief for Puerto Rico and other hurricane-ravaged U.S. territories so that they have a chance to get back on their feet,” according to the sponsors.

"Greedy Wall Street vulture funds must not be allowed to reap huge profits off the suffering and misery of the Puerto Rican people for a second longer. It is time to end Wall Street's stranglehold on Puerto Rico's future, return control of the island to the people of Puerto Rico and give the territory the debt relief it so desperately needs to rebuild with dignity," said Sanders, I-Vt.

"Puerto Rico was already being squeezed before Hurricane Maria hit and will now have to rebuild under the weight of crushing debt. Our bill will give territories that have suffered an extraordinary crisis a route to comprehensive debt relief and a chance to get back on their feet," said Warren, D-Mass. "Disaster funding and the other resources in struggling territories' budgets must not go to Wall Street vulture funds who snapped up their debt. Congress should pass this legislation right away — our fellow U.S. citizens are counting on us."

The legislation would give Puerto Rico and other U.S. territories the choice to terminate nonpension debt loads if they meet “certain stringent criteria,” according to the bill.

Rep. Nydia Velazquez, D-N.Y., is planning to introduce a companion bill in the House in September.

"After Maria, Puerto Rico needs every tool possible to recover physically and economically. This legislation provides another path for the Island to get back on its feet and begin the journey toward a brighter future,” she said in a statement.

A U.S. territory would have to meet two of three criteria in order to qualify for the debt relief: be the recipient of major federal disaster assistance, have a population decline of 5 percent over 10 years or have per-capita debt exceeding $15,000.

Puerto Rico would almost certainly meet these requirements if the bill were to be signed into law.

The bankrupt island's outstanding bond indebtedness is roughly $73 billion, or nearly $17,000 debt per capita, before Hurricane Maria struck the island in September. The Commonwealth has also projected a cumulative decline in population of 19.4 percent by 2022, according to the island’s fiscal plan.

If Puerto Rico chooses to terminate its debt within three years of the bill being signed into law, $15 billion in federal funds would become available to some of the island’s residents and other creditors whose holdings were terminated.

The Territorial Relief Act of 2018 would use a special master to oversee the $15 billion in the “Puerto Rico Debt Restructuring Compensation Fund.”

Some $7.5 billion would be allocated for Puerto Rican creditors who held the terminated debt, including the island’s residents, banks and credit unions that did business solely in Puerto Rico, the island’s unions and public pension plans, businesses with a principal place of business on Puerto Rico, and anyone else the special master identifies.

Another $7.5 billion would be allocated for creditors on the mainland U.S. who held the terminated debt, including individual investors, trade unions, pension plans, open-end mutual funds that pledge to waive the manager’s fee for any compensation received, and anyone else the special master identifies, according to the bill.

The bill would exclude “hedge funds and their investors, bond insurers, many financial firms with consolidated assets greater than $2 billion, and repo or swaps investors from the distribution,” according to the summary of the legislation.

https://www.cnbc.com/amp/2018/07/25...roduce-bill-that-would-slash-puerto-rico.html

That is wrong. Only large corporations should be able to go bankrupt.

 

[panamaican]

PR should be working to reduce the debt to a very manageable level without totally annihilating the lender. If you do that, it cripples the ability to borrow in the future. It should be like a formal municipal BK process, like say Detroit. Having said that, @Arkain2K is correct that you need to look at the future or we will just be back in the same spot. So some sort of political reform is needed or we are going to have mini Venezualas under the US flag.

Yes, in utopia that makes sense. In reality...?

In reality, we have bankruptcy proceedings precisely because the indebted entity does not have a reasonable path forward to paying down their debt manageably. And in reality, the debtor gets their credit shot to shit and usually can't borrow again for a long time without onerous terms.

How exactly is this different. PR still has to manage their pension debt. On island creditors get some of their money back. Off island creditors don't. PR can start figuring out how to meet their pension debt. Sure, Wall Street won't lend to them anymore but so what?

Now, if we're looking to the future in a real fashion - what exactly is PR's alternative solution to managing their debt load? Claiming that they should just figure it out doesn't actually solve a problem. As I mentioned previously, we have bankruptcy proceedings for individuals and corporations because we know that sometimes there is no path to sustainable debt management without some form of debt relief.

 

[franklinstower]

Yes, in utopia that makes sense. In reality...?

In reality, we have bankruptcy proceedings precisely because the indebted entity does not have a reasonable path forward to paying down their debt manageably. And in reality, the debtor gets their credit shot to shit and usually can't borrow again for a long time without onerous terms.

How exactly is this different. PR still has to manage their pension debt. On island creditors get some of their money back. Off island creditors don't. PR can start figuring out how to meet their pension debt. Sure, Wall Street won't lend to them anymore but so what?

Now, if we're looking to the future in a real fashion - what exactly is PR's alternative solution to managing their debt load? Claiming that they should just figure it out doesn't actually solve a problem. As I mentioned previously, we have bankruptcy proceedings for individuals and corporations because we know that sometimes there is no path to sustainable debt management without some form of debt relief.

Not to be a shit but actually going bankrupt is not a big deal as far as future lending goes. I have heard the Russians are very willing to lend money to repeat bankruptcies just out of good will.

 

[Quequeg]

So the global elite banksters might have to take a hair cut, cry me a river!

 

[D3thr0n3d K1ng]

I want to go to a strip club with Bernie. Dude would be making it rain all night and pay the tab with someone else's card.

You mean like how Trump is making it rain for the Pentagon and farmers who were fvked over by his trade war?

 

[nostradumbass]

You mean like how Trump is making it rain for the Pentagon and farmers who were fvked over by his trade war?

But but but Trump. I already responded to another "but Trump" and this thread isn't very long. They aren't even close.

 

[D3thr0n3d K1ng]

But but but Trump. I already responded to another "but Trump" and this thread isn't very long. They aren't even close.

Trump: "I need 686 billion for the military"

sanders: "I need 75 billion for expanding education"

Murkans: "75billion!!!! how can we afford that!!!"

 

[My Spot]

But but but Trump. I already responded to another "but Trump" and this thread isn't very long. They aren't even close.

He's an admitted troll that's gone insane since 2016. Just pat him on the head and move on.

 

[nostradumbass]

Trump: "I need 686 billion for the military"

sanders: "I need 75 billion for expanding education"

Murkans: "75billion!!!! how can we afford that!!!"

Ah, you haven't even looked at Bernie's platform then. Have a nice day.

 

[panamaican]

I've said multiple times that I don't like how much Trump is spending and republicans in general are getting a little loose with spending, but let's be honest here, Bernie's entire platform is wild expense after wild expense. The country can't pay for any of the things he's proposed and he wants to do all of them.

Which things are you thinking about because universal healthcare can be paid for by reductions in military spending. Free college education can be paid for by reallocating our existing college spending and consolidating it towards that goal.

The only one I'm not sure about being affordable is the UBI thing.

Of course, this was before we slashed our revenue via tax cut.

 

[Arkain2K]

Fifth Time's a Charm? Puerto Rico Power Utility Taps Another CEO
By Yalixa Rivera and Jonathan Levin | July 18, 2018

Puerto Rico’s bankrupt power utility named yet another chief executive officer, turning this time to an insider with an inexpensive salary after a firestorm over his predecessors’ compensation.

The move capped eight days of upheaval after one CEO resigned, his replacement backed out and five of seven board members quit, citing the interference of "petty political interests."

In an announcement Wednesday in San Juan, Governor Ricardo Rossello said the Puerto Rico Electric Power Authority’s next head would be Jose Ortiz, a former chief executive of the water and sewer utility and one-time chairman of the power company known as Prepa. Ortiz had more recently been working as a consultant.

The most important challenge "is elevating credibility," Ortiz said Wednesday at the governor’s residence. "It’s making people understand that Prepa is going to honor its commitments, and that we have drawn a path forward that is coherent and that benefits the people of Puerto Rico."

Perhaps most significantly, he accepted the job with a $250,000 annual salary, a third of the $750,000 base promised to the last nominee, Rafael Diaz-Granados. Amid the uproar, Diaz-Granados withdrew the day after he was named.

The churn underscores the challenges facing the utility. After years of mismanagement and corruption, the company is a shambles, charging above-mainland rates to provide unreliable service. In addition to bankruptcy, the next CEO will also oversee efforts to sell assets and put the transmission and distribution unit under a private concessionaire.

Puerto Rico is bracing for austerity measures, and residents erupted when they learned this year that Prepa’s top executive wouldn’t be sharing their sacrifice. In March, Walter Higgins -- an executive from Nevada who had a long resume but didn’t speak Spanish -- was named CEO with a $450,000 salary, plus bonus. The legislature blocked the bonus, prompting his resignation last week. Diaz-Granados’s richer base pay seemed to be designed to circumvent that legislation.

Diaz-Granados technically quit before his start date. But even if you exclude him from the CEO turnover, the utility has cycled through four other chief executives just since November. That’s when Ricardo Ramos was pushed out amid criticism of power-restoration efforts after Hurricane Maria, including a $300 million contract the company extended to Whitefish, a little-known two-person company named after its Montana hometown.

Ortiz said $250,000 year is “adequate” and appropriate given Puerto Rico’s situation.

https://www.bloomberg.com/news/arti...r-spat-spills-into-hallowed-halls-of-congress

 

[Gandhi]

Yes, in utopia that makes sense. In reality...?

In reality, we have bankruptcy proceedings precisely because the indebted entity does not have a reasonable path forward to paying down their debt manageably. And in reality, the debtor gets their credit shot to shit and usually can't borrow again for a long time without onerous terms.

How exactly is this different. PR still has to manage their pension debt. On island creditors get some of their money back. Off island creditors don't. PR can start figuring out how to meet their pension debt. Sure, Wall Street won't lend to them anymore but so what?

Now, if we're looking to the future in a real fashion - what exactly is PR's alternative solution to managing their debt load? Claiming that they should just figure it out doesn't actually solve a problem. As I mentioned previously, we have bankruptcy proceedings for individuals and corporations because we know that sometimes there is no path to sustainable debt management without some form of debt relief.

What exactly is utopian about what I said? I suggested they be allowed to legally enter into a BK process similar to a municipal bankruptcy. Under those laws they can work out who gets paid how much while respecting things like priority payments, security rankings, and balance getting out of debt while having some go forward credibility with outside debtors. Even the creditors in Detroit got some pennies on the dollar so I don’t see why this would be any different, that’s not utopian that’s being pragmatic.

Again it’s probably not that different than what happened in 2015. It will have to be more drastic this time.

 

[panamaican]

What exactly is utopian about what I said? I suggested they be allowed to legally enter into a BK process similar to a municipal bankruptcy. Under those laws they can work out who gets paid how much while respecting things like priority payments, security rankings, and balance getting out of debt while having some go forward credibility with outside debtors. Even the creditors in Detroit got some pennies on the dollar so I don’t see why this would be any different, that’s not utopian that’s being pragmatic.

Again it’s probably not that different than what happened in 2015. It will have to be more drastic this time.

With the exception of the off-island creditors not receiving any of the funding, this is pretty much identical to a municipal bankruptcy.

And when I said utopian, I was referring to the idea that there is some path by which Puerto Rico can actually pay back its debt and go forward with even pennies on the dollars liability on its back. Plenty of businesses look at bankruptcy and find out that there is no payment plan under which they can adequately restructure their debt.

Toys R Us being a recent example of a company where bankruptcy simply could not solve their debt problem so they're shutting their doors permanently.

You can't do that with a municipality. So, given PR's dwindling population, massive infrastructure investment needed following a hurricane decimating the country, and the already sky-high debt that preceded that event...what good is a standard municipal bankruptcy proceeding where private capital entities will eat up significant public funds that should be rebuilding the country?

 

[woodguyatl]

I suppose painting Puerto Rico as the unwilling victim to the evil investors who invested in Puerto Rican bonds on the open market with the terms set by the Puerto Rican government is more sympathetic to the uninformed public than pointing out that they have inevitably arrived at this point after decades of systemic corruption and incompetent.

We bailed out private auto manufacturers who got their of their own accord. To your point, I think that was a mistake as well.

 

[woodguyatl]

While it may not be the fault of the individual, it seems pretty clearly the fault of the citizenry as a whole.




Pretty sure this fucks us over here in Hawaii too.

It does, Alaska as well. It is less than you might think though. Consumers, at least about 10 years a ago, we’re paying an extra $10 per person per year. It is hard on business though, especially those exporting to the mainland.

 

[LangfordBarrow]

Can they include in there that my student loan debt is forgiven?

Was your house ripped apart by a hurricane?