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

[Arkain2K]

Hundreds of thousands of protesters flooded the Expreso Las Américas highway in San Juan on Monday calling for the ouster of Gov. Ricardo A. Rosselló.

Thread Index:

• Puerto Rico Board’s Proposal Spark Pensioners' Anger (October 7, 2019)
  
• $129 Billion Puerto Rico Bankruptcy Plan Could Be Model for States (Sept. 27, 2019)
  
• The People Can’t Take It Anymore’: Puerto Rico Erupts in a Day of Protests (July 22, 2019)
  
• US lawmaker who oversees Puerto Rico calls for governor to resign after 6 arrested on corruption charges (July 11, 2019)
  
• FBI Arrests Former Top Puerto Rico Officials In Government Corruption Scandal (July 11, 2019)
  
• Puerto Rico Seeks to Have $9 Billion in Debt Ruled Unconstitutional (May 2, 2019)
  
• Warren unveils new plan to restructure Puerto Rico debt (May 2, 2019)
  
• How Puerto Rico’s financial storm is washing over the mainland (March 8, 2019)
  
• Would Philly, N.J. take a cue from Puerto Rico’s plan to not pay $6 billion in bonds? (February 26, 2019)
  
• Puerto Rico oversight board asks court to invalidate $6 billion General Obligation bonds (January 14, 2019)
  
• For Puerto Ricans, a first step toward debt relief (November 07, 2018)
  
• Puerto Rico reaches deal with COFINA bondholders to restructure sales-tax bonds (August 8, 2018)
  
• Puerto Rico reaches deal to restructure $3B of power utility's debt (July 30, 2018)
  
• Federal Judge rules that bankrupt Puerto Rico’s bondholders can sue the United States for losses incurred by PROMESA (Jul 16, 2018)
  
• Who owns Puerto Rico's mountain of debt? You do.
  
• Fifth Time's a Charm? Puerto Rico Power Utility Taps Another CEO (July 18, 2018)
  
• Bloomberg Opinion: Puerto Rico doesn't need another costly legal battle (July 26, 2018)
  
• Puerto Rico Asks Judge to Force Federal Board to Share Its Power (July 25, 2018)
  
• Congress Ponders Oversight of Puerto Rico Utility Aid (July 25, 2018)
  
• Senators Warren, Sanders, Gillibrand, Markey, Harris introduce bill that would slash Puerto Rico's $74 Billion debt

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

---

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

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 'em how to be responsible, finally!

Lastly, it's important to point out that of only $15 Billion of Puerto Rico's municipal bonds are held by large Hedge Funds. Another $11 Billion are held by Mutual Funds representing pension funds, unions, and alike. The rest are held by individual investors. That means more than 75% of Puerto Rico's outstanding debt are owed to your everyday average Joes and Janes.

Try to keep that fact in mind before you are incited to bring out your pitch-fork to hunt down them evil "Greedy Vultures", for "they" just might be your friendly next-door neighbors who invested their life savings into the bonds offered by the Puerto Rican government.

 

[Gunny]

I think you can make a case that a relief bill is in order but I just don’t get Sander’s need to vilify someone in his call (and I’m no great fan of the finance sector in general either). It’s almost like a verbal tick

 

[Arkain2K]

I think you can make a case that a relief bill is in order but I just don’t get Sander’s need to vilify someone in his call (and I’m no great fan of the finance sector in general either). It’s almost like a verbal tick

I suppose painting Puerto Rico as the unwilling victim to the evil investors who invested in Puerto Rican bonds on the open market under the terms offered by the Puerto Rican government over the last 25 years 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.

When this bill is being pushed through Congress, I don't expect the inconvenient fact that 75% of Puerto Rico's municipal bonds are owned by individual American investors will be highlighted on the Senate floor by Senator Warren and Sanders either, as they spit venom at the "Greedy Vultures" who are apparently responsible for all of Puerto Rico's suffering and misery.

 

[Cubo de Sangre]

Sounds like some third-world shit.

 

[Rod1]

I suppose painting Puerto Rico as the victim to the evil investors 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.

Add massive population decline into the mix.

 

[Rod1]

Sounds like some third-world shit.

They are in the same position as Greece with a currency they cant control and a population that would rather migrate to greener pastures because they belong to a rich union creating a bigger problem.

 

[Rational Poster]

I suppose painting Puerto Rico as the victim to the evil investors 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.

This is a bit disengenous.

So the only reasons for Puerto Rico's situation is because of the reasons you agree with?

It couldn't be a combination of predatory lending practices and lack of financial relief programs available to regular states AND corruption and incompetence?

 

[Arkain2K]

This is a bit disengenous.

So the only reasons for Puerto Rico's situation is because of the reasons you agree with?

It couldn't be a combination of predatory lending practices and lack of financial relief programs available to regular states AND corruption and incompetence?

Blaming investors on the open bond market for all of Puerto Rico's misery, now THAT's disingenuous.

It's universally acknowledged that Puerto Rico is fucked because the democratically-elected Puerto Rican government failed to do ANYTHING meaningful to diversify their economy back when their coffers was flushed with cash, such as transitioning that beautiful island from a booming factory town to a regional tourism powerhouse that it should be, before the Federal tax incentives expires (as expected), the big manufacturers pulled out (as expected), all the now-unemployed young people have no choice but to flee to the main land to find work (as expected), and the island's eventual bankruptcy (definitely expected).

None of that came as a surprise for anyone. They all happened gradually and expectedly, like an extremely slow-moving trainwreck. In fact, some would say that the incompetent and corrupt Puerto Rican government did absolutely nothing was rather expected as well.

For decades now, the Puerto Rican people are perfectly okay with electing politicians that had zero plans for their future besides making themselves rich while kicking the can further down the road by borrowing more and more money than ever before from bond investors on Wall Street to fill their budget each year, the same investors now being vilified by Senators Warren and Sanders as "vultures".

What pisses me off the most about all this talk about Puerto Rico is that they rarely include a plan to actually fix the underlying problems that drove them to the cliff, even though EVERYONE knows what the problems were, because it's so much easier to blame everyone else (or perhaps scapegoating century-old legislation that applies to all U.S ports like the Jones Act), except those who are truly responsible for their demise.

 

[HomerThompson]

Take that! Investors Capitalist Pigs!

Senators Warren, Sanders, Gillibrand, Markey, Harris introduce bill that would slash Puerto Rico's debt
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

Good. Vulture capital funds should be illegal anyway. Fuck those people.

 

[Cubo de Sangre]

They are in the same position as Greece with a currency they cant control and a population that would rather migrate to greener pastures because they belong to a rich union creating a bigger problem.

Sounds like a local problem.

 

[Rational Poster]

It's universally acknowledged that Puerto Rico was fucked because the incompetent Puerto Rican government failed to do anything meaningful to diversify their economy back when their coffers was flushed with money, such as transitioning that beautiful island from a factory to a regional tourism powerhouse that it should be before the Federal tax incentives expires as expected, the big manufacturers pulled out as expected, and all the now-unemployed young people have no choice buy to flee to the main land to find work, also as expected.

For years after that, the Puerto Rican people are perfectly okay with their government doing absolutely nothing to improve the situation besides keeps kicking the can down the road by borrowing more and more money from bond investors on Wall Street to fill their budget each year, the same investors now being villified by Senators Warren and Sanders as "vultures".

All this talk about Puerto Rico debts rarely include a plan to actually fix the underlying problems that drove them to the cliff, for it's so much easier to blame it on the capitalist pigs.

I didn't disagree with that, but don't you think it could be that AND some capitalist pigs taking advantage of a poor and corrupt government for their own financial gain in a market that is essentially not regulated compared to ours?

 

[Rational Poster]

Sounds like a local problem.

Puertoricans are US citizens.

 

[HunterSdVa29]

it's called not being corrupt, incompetent, and taking responsibility for their complete lack of action....

none of these other things happen without that, step their damn game up PR

 

[Seano]

FREE STUFF FOR EVERYONE!

 

[Kindacrazy]

It's universally acknowledged that Puerto Rico was fucked because the incompetent Puerto Rican government failed to do anything meaningful to diversify their economy back when their coffers was flushed with money, such as transitioning that beautiful island from a factory to a regional tourism powerhouse that it should be before the Federal tax incentives expires as expected, the big manufacturers pulled out as expected, and all the now-unemployed young people have no choice buy to flee to the main land to find work, also as expected. Then years later Puerto Rico declared bankruptcy, as expected.

None of that came as a surprise. They all happened gradually and expectedly. And the Puerto Rican government did and still does nothing. Some would say that was expected as well.

For years now, the Puerto Rican people are perfectly okay with continuing their tradition of electing politicians that had zero plans for their future and did absolutely nothing to improve the situation besides keeps kicking the can down the road by borrowing more and more money than ever from bond investors on Wall Street to fill their budget each year, the same investors now being villified by Senators Warren and Sanders as "vultures".

All this talk about Puerto Rico debts rarely include a plan to actually fix the underlying problems that drove them to the cliff, even though everyone knows what the problems were, for it's so much easier to blame it on anyone else but those who are responsible for their own demise.

I agree with everything you wrote. Unfortunately Puerto Rico lies within a free movement zone, thus the correlation between the current population and the population which created the problem is in constant flux. This is why mega states are all bound to fail eventually.

 

[Ultra O’Dia]

I think you can make a case that a relief bill is in order but I just don’t get Sander’s need to vilify someone in his call (and I’m no great fan of the finance sector in general either). It’s almost like a verbal tick

that side always has to be seen as brave heroes fighting valiantly against the same tired, capitalist foe on behalf of the poor. It works on a lot of people.

 

[Arkain2K]

I didn't disagree with that, but don't you think it could be that AND some capitalist pigs taking advantage of a poor and corrupt government for their own financial gain in a market that is essentially not regulated compared to ours?

The government that issues the bonds set the terms in the open market, not the investors.

Let's say this bill passes, and then what? The evil "capitalist pigs" who committed the high crime of using their life savings to buy Puerto Rican municipal bonds have their investments wiped out at a stroke of a pen, Puerto Rico gets a fresh start with zero debt, with the same corrupted and incompetent Puerto Rican politicians they freely voted for still at the helm, leading an island full of pensioners stumbling into the future.

How long do you think it's going to be until the cycle restarts all over again? Next Monday or Tuesday?

Who would buy Puerto Rican bonds then?

 

[Rod1]

Sounds like a local problem.

Pretty much.

But that will simply be solved by people leaving for the mainland.

 

[Rational Poster]

And then what? Let's say the "capitalist pigs" have their Billions in investment wiped out at a stroke of a pen, Puerto Rico get a fresh start with zero debt, with the same corrupted and incompetent Puerto Rican politicians they freely voted for at the helm, leading an island full of pensioners into the future.

How long do you think until the cycle starts all over again?

What do you want to do? A Stalinist purge?

They're American citizens. It seems to me like America and Puerto Rico created this situation together, but you just want Puerto Rico to fix it on their own while fully admitting that they don't have the competency or wealth to do so.

 

[IReallyDoTrainUFC]

Watch Joe Rogans podcast with Peter Schiff on. Peter explains why this is a horrible idea.