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  #111  
Old 05-02-2017, 08:14 AM
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http://www.reuters.com/article/us-pu...-idUSKBN17X285



Quote:
U.S. Congress to give Puerto Rico short-term Medicaid help


Ailing Puerto Rico would receive $295 million in Medicaid funding from the federal government as part of the U.S. Congress' spending plan to avert a government shutdown, Governor Ricardo Rossello said on Monday.

Rossello said in a statement in Spanish that he was "grateful" for the addition in the spending bill reached late Sunday night.

The full House of Representatives and Senate must approve the bipartisan pact, though prompt passage was expected this week.

Puerto Rico's public health system is nearly insolvent, a key driver of emigration that has decimated the U.S. territory's population as it wrestles with $70 billion in debt, a 45 percent poverty rate and unemployment twice the U.S. average.

The island faces a deadline at midnight Monday to negotiate a debt-cutting agreement with creditors, or open itself up to lawsuits over debt defaults. It could also file for a modified version of U.S. bankruptcy to protect itself from such litigation.

One creditor, who owns insured Puerto Rican bonds, said the proposal was "not even close to a good proposal.

"Not just lowball but also not a well constructed proposal," said Sean Burgess, portfolio manager and lead trader for Puerto Rico strategy at Sarasota, Florida-based Cumberland Advisors.

BANKRUPTCY?

The island's aggressive lobbying for federal healthcare funding in Washington is seen as a possible detractor to filing bankruptcy, which would not garner sympathy from Congressional Republicans who opposed the in-court restructuring provision in last year's Puerto Rico rescue law, PROMESA.

The $295 million will help fund the island’s Medicaid budget for fiscal year 2018, which starts July 1, and enable Puerto Rico to contract with managed care health insurance companies that administer the Medicaid program.

Without the money, the island would have to run the Medicaid program on its own, a massive undertaking that Puerto Rico is not equipped to do, said island Health Secretary Dr. Rafael Rodríguez-Mercado.

But Puerto Rico will still need an additional $300 million to fund its entire Medicaid budget for fiscal year 2018, Rodríguez-Mercado told Reuters in an interview on Monday. He hopes that money will come from the Children’s Health Insurance Program (CHIP) in September.

Puerto Rico’s $2.76 billion Medicaid budget has been funded in part by a one-time pool of money provided to U.S. territories under the Affordable Care Act, commonly referred to as Obamacare.

That money is expected to run out by the end of 2017, triggering what island officials call the “Medicaid cliff” — the return to a federal funding cap of $321 million for Puerto Rico’s Medicaid program.

U.S. territories receive proportionately less federal Medicaid reimbursement than U.S. states. Prior to Obamacare, Puerto Rico partially funded its Medicaid budget through bonds, exacerbating the island’s debt crisis.

In recent weeks, Governor Ricardo Rossello has been lobbying to boost Puerto Rico’s healthcare funding, warning that Washington’s failure to do so would leave some 900,000 people without health coverage.

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  #112  
Old 05-03-2017, 01:55 PM
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http://www.reuters.com/article/us-pu...-idUSKBN17Z1UC

Quote:
Puerto Rico requests bankruptcy protection for public debt

Puerto Rico's financial oversight board on Wednesday filed for a form of bankruptcy protection under last year's federal rescue law known as PROMESA, touching off the biggest bankruptcy in the history of the U.S. municipal debt market.

The move comes a day after several major creditors sued the U.S. territory and its Governor Ricardo Rossello over defaults on the island's $70 billion in bonds.

The request came under Title III of the PROMESA law is an in-court debt restructuring process akin to U.S. bankruptcy protection, as Puerto Rico is barred from traditional bankruptcy because it is a U.S. territory. The case was filed in U.S. District Court in Puerto Rico.

The process will give Puerto Rico the legal ability to impose drastic discounts on creditor recoveries, but could also spook investors and prolong the island's lack of access to debt markets.

"The governor needed to show that his primary allegiance lies with the citizens of Puerto Rico, and that was the justification for the filing," said David Tawil, whose fund, Maglan Capital, held Puerto Rico GO debt but has since sold it. "I’m not sure whether bondholders are going to get any better treatment or recovery under this course of action."

The legal proceeding does not mean negotiations toward a consensual restructuring agreement must stop, the governor said in a statement on Wednesday.

"It is my hope that the Government’s Title III proceedings will accelerate the negotiation process," the governor said in the statement.

Rossello's fiscal plan for the island, approved by the oversight board in March, forecasts Puerto Rico having only $800 million a year to pay debt, less than a quarter of what it owes. The low figure alienated creditors, and negotiations toward a restructuring deal have foundered.

In addition to its debt, Puerto Rico is facing a 45 percent poverty rate, a shrinking population and unemployment more than twice the U.S. average.

Puerto Rico and its general obligation bondholders, whose $18 billion of debt is backed by the island's constitution, were negotiating until the last minute.

GO holders offered to accept cuts of 10 cents on the dollar, Elias Sanchez, Rossello's liaison to the oversight board, told Reuters on Wednesday.

The government responded with an offer to repay 70 percent of claims through new bonds, and another 20 cents through a "growth" bond, payable only if Puerto Rico surpassed fiscal projections.

The sides could not reach a deal, and GO creditors sued the island on Tuesday.

(Writing by Nick Brown; Additional reporting by Jonathan Stempel; editing by Clive McKeef)



https://www.nytimes.com/2017/05/03/b...debt.html?_r=0

Quote:
Puerto Rico Declares a Form of Bankruptcy

The governor of Puerto Rico, Ricardo Rosselló, said he would move the island’s debt crisis into federal bankruptcy court, making it the largest government to seek refuge from its creditors in United States history.

Puerto Rico has roughly $73 billion of bond debt, and nearly $50 billion of unfunded pension obligations to restructure.

The case will not be formally called bankruptcy, since Puerto Rico is barred from using Chapter 9, the usual chapter used by insolvent local governments. It will instead petition for relief under a new federal law for insolvent territorial governments, called Promesa.


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  #113  
Old 05-03-2017, 06:57 PM
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https://www.bloomberg.com/news/artic...ptcy-like-case

Quote:
Puerto Rico Files for Historic $70 Billion Debt Restructuring

Court option was extended in U.S. rescue law enacted last year
The proceedings will dwarf Detroit’s record-setting bankruptcy



Puerto Rico is seeking to use federal bankruptcy-like proceedings to slash its $70 billion debt after more than a year of talks with bondholders and insurers, pushing the territory toward the biggest restructuring ever by a U.S. state or local government.

After a decade-long recession, a population exodus and years of borrowing to cover budget gaps, the U.S. commonwealth is asking a court to force creditors to take losses on their investments. The process, called Title III, was created by a U.S. law enacted last year to help Puerto Rico emerge from its economic malaise.

The move, announced by Governor Ricardo Rossello and then followed by a filing in U.S. court in San Juan, came after he and his predecessor both failed to persuade the island’s major creditors to accept less than they’re owed and the government faced an onslaught of new lawsuits stemming from a series of defaults.

“An orderly process for working out Puerto Rico’s debt trouble provides the best hope for Puerto Rico and also the best chance for most creditors to emerge better off,” Brad Setser, senior fellow at The Council on Foreign Relations, said in a telephone interview. “But clearly there’s going to be fights between different groups of creditors.”

Puerto Rico’s restructuring will be the largest ever in the $3.8 trillion municipal-bond market. The island, where nearly half its residents live in poverty, has struggled since 2006 to grow its economy. About 62,000 residents left the island last year, the steepest decline since 2004.

"We have reached this decision because it protects the best interests of the people of Puerto Rico," Rossello, who took office in January, said.

Some bondholders disagree. A group of hedge funds holding general-obligation bonds claim a deal with Puerto Rico was within reach Tuesday until a federal board that oversees the commonwealth’s finances intervened and blocked a potential agreement.

With the board’s Title III filing, “the governor has forfeited all power over the restructuring, and the economy of Puerto Rico will be put on hold for years,” Andrew Rosenberg, a partner at Paul Weiss Rifkind Wharton & Garrison, who advises the group of general-obligation bondholders, said in an email. “Make no mistake: The Board has chosen to turn Puerto Rico into the next Argentina.”

The financial collapse promises to impose deep losses on bondholders who for years snapped up Puerto Rico’s securities, which are tax-free throughout the U.S. U.S. states can’t file for bankruptcy, and investors bought the bonds assured that it wasn’t a legal option for Puerto Rico either.

The scale of the restructuring is far larger than Detroit’s record-setting $18 billion bankruptcy, and it’s unclear how long a court proceeding would last or how deep would be the cuts that are imposed on bondholders. The island’s financial recovery plan covers less than a quarter of the debt payments due over the next decade, assuming Puerto Rico’s budget can be steadied.

Rossello’s latest offers to creditors show the commonwealth believes general obligations should receive a better recovery than its sales-tax bonds, another major class of its debt. The latest proposal would have provided as much as 90 cents on the dollar to general-obligation bondholders.
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  #114  
Old 05-03-2017, 08:26 PM
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  #115  
Old 05-04-2017, 11:28 PM
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https://www.usatoday.com/story/money...rts/101277530/

Quote:
Puerto Rico's bankruptcy fate is now up to Chief Justice John Roberts


A little-noticed provision in a bill signed into law in 2016 places the fate of Puerto Rico in the hands of the Supreme Court's chief justice.

After Puerto Rico filed for the equivalent of bankruptcy protection Wednesday, the immediate question was which judge would be appointed to oversee the case.

Turns out that's up to Chief Justice John Roberts.

The Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) signed by President Obama gives Roberts the power to appoint a District Court judge to oversee the bankruptcy-like case involving a U.S. territory.

That was a "jarring break" from traditional municipal bankruptcies, which are overseen by bankruptcy judges, said Melissa Jacoby, a University of North Carolina law professor, in a recent paper studying the topic.

One significant difference is that District Court judges, unlike bankruptcy judges, are political appointees.

....The fierce legal battle that's about to ensue will involve a fight over which creditors deserve to be paid the most.

That may ultimately require the judge in control of the case to make tough decisions, distinguish between creditors, referee disputes with little legal precedent and possibly decide whether retirees will endure cuts to their pensions and health care.

Previous municipal bankruptcies have demonstrated that judges exert considerable influence over the outcome, even though the law prevents them from ordering municipal debtors to sell assets or spend money in a certain way, Jacoby said.

Puerto Rico's case could even result in a debt-cutting plan implemented over the objection of creditors, known legally as a "cram down," Jacoby said. The judge would decide whether that's fair.


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  #116  
Old 05-05-2017, 06:44 PM
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http://www.governing.com/topics/fina...m_medium=email

Quote:
Puerto Rico (Sort of) Declares Bankruptcy

Puerto Rico declared a form of bankruptcy protection this week that puts it in uncharted territory for U.S. governments and municipal finance.

As a territory, Puerto Rico is not eligible to file for Chapter 9 protection. But thanks to the Puerto Rico Oversight, Management and Economic Stability Act, it has a similar option available to it: Title III protection.

The act, which was passed by Congress and went into effect last July, put a temporary moratorium on litigation regarding Puerto Rico’s more than $70 billion in bond debt and created a seven-member financial oversight board with final say over the commonwealth’s finance decisions. The litigation moratorium was lifted on May 1, and with creditor negotiations going nowhere, the government is allowed to file debt restructuring petitions in federal court.


The Takeaway: Puerto Rico has been in a financial downward spiral for years. When it first started defaulting on debt, there were concerns that it could have a negative ripple effect on the municipal market. As it turns out, those concerns have not been justified. So, while this latest move by the commonwealth is a great concern for anyone with money tied up in Puerto Rico, there have been few concerns that the event will cast a shadow over other U.S. governments now issuing bonds.

The crisis in Puerto Rico, however, is already having a ripple effect on the mainland as residents are fleeing the island to find jobs. In Florida, the Puerto Rican population increased by nearly one-fifth in Orange County and nearly one-third in Hillsborough County. The growth is putting pressure on schools, which are increasing their budgets to accommodate the influx of children.
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  #117  
Old 05-05-2017, 06:45 PM
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https://www.usatoday.com/story/money...ain/101329204/

Quote:

John Roberts appoints New York judge to oversee Puerto Rico bankruptcy

Supreme Court Chief Justice John Roberts on Friday appointed a New York judge with experience overseeing bankruptcy and financial crime cases to preside over the bankruptcy of Puerto Rico.

Roberts named U.S. District Court Judge Laura Taylor Swain of the Southern District of New York to lead a case involving prodigious complexity and scope, not to mention profound implications for millions of American citizens, creditors and pensioners.

The appointment of Swain to oversee Puerto Rico's debt-cutting case may alleviate concerns among some legal observers that the case could fall into the hands of a federal judge without bankruptcy expertise.

Roberts was required by law to appoint a District Court judge, not a bankruptcy judge as is typical in municipal cases. He made no comment in a court filing on his decision.

Swain was a bankruptcy judge in the Eastern District of New York from 1996 through 2000 until President Clinton appointed her to her current role in the District Court. And she has played a key role in revising federal bankruptcy procedures, which will be critical to Puerto Rico's case, having earned a reputation for thoroughness and fair treatment in her past cases.


Although she's based in Manhattan, she is expected to preside over cases at a federal courthouse in San Juan, Puerto Rico. A federal courts spokeswoman said Swain would not do any interviews on her appointment.
.....
The oversight board appointed to lead the U.S. territory back to fiscal sustainability declared in a court filing that it was "unable to provide its citizens effective services," crushed by $74 billion in debts and $49 billion in pension liabilities.

Swain may be in a position to rule on whether pensions can be cut, whether creditors are being treated fairly and whether the island has identified a viable route to restore fiscal order.
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  #118  
Old 05-07-2017, 04:45 PM
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https://www.nytimes.com/2017/05/06/u...iety.html?_r=0

Quote:
Puerto Ricans Face ‘Sacrifice Everywhere’ on an Insolvent Island

SAN JUAN, Puerto Rico — Angel González, a retired schoolteacher facing a 10 percent cut to his pension, is beginning to wonder whether his three-person household will have to cut back to one cellphone and take turns using it.

Santiago Domenech, a general contractor with $2 million of his savings tied up in bonds Puerto Rico just defaulted on, once had 450 employees. Now he has eight. His father-in-law, Alfredo Torres, owns Puerto Rico’s oldest bookstore, but it has been going downhill for two years.

“The government is bankrupt,” said Bernardo Rivera, 75, a private bus driver who sometimes earns only $40 all day. “Everyone is bankrupt. There is nothing left. People who do not have jobs do not take the bus to work.”

These are some of the voices of Puerto Rico’s business owners, retirees and public servants who are caught in the middle — they would say the bottom — of the largest local government insolvency in United States history. Faced with a $123 billion debt it cannot pay, Puerto Rico filed for a kind of bankruptcy protection on Wednesday, a move that sent shivers down the spines of everyone from bond holders fearful of staggering losses to street sweepers and public employees whose already meager paychecks are likely to dwindle.

.....
The government plans sweeping austerity measures in the coming months that will hit teachers especially hard. On Friday, Puerto Rico’s education secretary announced a proposal to close 184 schools. Teachers may see their hours trimmed by two days a month.

So while the government seeks protection from lawsuits from the hedge funds and other financial firms that invested in Puerto Rico’s risky debt, residents of this United States territory are taking the squeeze. Fines for parking and other traffic violations have doubled. Dozens of government agencies are on the chopping block, while perks like the annual Christmas bonus and pay for unused sick time make for wistful memories.

On an island where household electric bills often reach hundreds of dollars, residents are worried that their future has been placed in the hands of strangers — an oversight board and a federal judge — who may or may not feel much empathy for American citizens whose per capita income is about $15,000 but who pay $6.25 for a gallon of milk and have an 11.5 percent sales tax.

.....
Gov. Ricardo A. Rosselló, who took office in January, acknowledged that low-income people without access to health care and parents with children in public schools would be the most vulnerable in the months ahead.

“There has to be sacrifice everywhere,” he said in an interview. “We have been very clear about what that sacrifice is.”

His measures were deliberately spread out, so they do not hit any one group unfairly hard, he said. Although most residents believe Mr. Rosselló had no choice but to seek some sort of protection from the flurry of lawsuits that had already begun, others have criticized him for breaking a campaign promise. He is in the awkward position of being the son of one of the long line of former governors who brought Puerto Rico to its fiscal knees by borrowing and borrowing to balance budgets and to finance a bloated bureaucracy ripe with political patronage.

The last two administrations cut tens of thousands of positions from public payrolls, and now Mr. Rosselló has vowed to make “strategic cuts” that do not cause layoffs but put the government in a position to better negotiate with its creditors. Among the ideas is to cut government pensions by 10 percent, which will hurt retired police officers and teachers most, because they do not receive Social Security benefits.

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  #119  
Old 05-08-2017, 05:49 PM
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https://www.bloomberg.com/news/artic...-be-so#new_tab

Quote:
Puerto Rico Collapse Shows Debts Seen as Ironclad May Not Be

Island using emergency, bankruptcy-like powers given by U.S.
Territories, like states, were never allowed to use bankruptcy


Puerto Rico’s decision to use a U.S. court to escape from its debts cast few ripples in the state and local bond market, where prices rose Wednesday. But the action -- once inconceivable for a territory that didn’t have authority to file for bankruptcy -- sets a precedent that could resonate with struggling states in the decades ahead.

The island was extended the bankruptcy-like powers by Congress as a way to end an intractable crisis, despite the assurance once given to investors that it couldn’t be done. While state finances are largely on the mend and officials have dismissed any suggestion they would ever push lawmakers for the same legal recourse, the path ceded to Puerto Rico has fostered speculation it may one day look attractive to governments at the end of their financial ropes.

“There’s a cautionary tale here across the board,” said Jim Millstein, founder of Millstein & Co., which served as financial adviser to Puerto Rico under former Governor Alejandro Garcia Padilla. “Municipal debt, state debt, federal debt, sovereign debt is not without risk. The truth is that bondholders get paid based on the health of the economy of the issuer.”

Puerto Rico’s restructuring will be the biggest in municipal-bond market history, vastly larger than Detroit’s $18 billion record bankruptcy, and will mark the first time a state-level issuer has had debt written off in federal court. It comes after years of borrowing to pay bills as the economy shrank and residents left for the U.S. mainland, leaving the government without enough revenue to repay what it owes.

Spoiler:


Quote:

.....
Municipal bankruptcies are rare, given that governments have the power to raise taxes to satisfy their debts. Even after the Great Recession, only a few local governments did so. And the scale of Puerto Rico’s debts is far larger than any other major American government, exceeded only by those of the more populated and wealthier New York, California and Massachusetts.

.......
Nobody should assume that a Puerto Rico-type restructuring could be applied to U.S. states: Territories and states are distinct under the U.S. Constitution, and the Tenth Amendment limits the federal government’s ability to legislate for the states, according to lawyers and legal scholars.

Virgin Islands

“If Congress acting under Article I powers were to amend the bankruptcy code to allow either voluntary or involuntary debt adjustment for U.S. states, very serious questions would be raised about unconstitutionality,” wrote Fordham University School of Law Professor Andrew Kent in a April 20, 2016 letter to the congressional committee that drafted Puerto Rico’s oversight law.

The events in Puerto Rico may have more immediate relevance to the U.S. Virgin Islands, its smaller Caribbean neighbor. Debt sold by the island is junk-rated, it faces population decline, large unfunded retirement liabilities and has a history of borrowing to fill budget gaps.

“If Puerto Rico can achieve this level of debt relief through Promesa as the initial plan suggested, it will only make sense for Virgin Islands to attempt the same,” said Matt Fabian, a partner with Municipal Market Analytics.
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Old 05-08-2017, 05:50 PM
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https://www.bloomberg.com/news/artic...-market-exodus

Quote:
Puerto Rico Menaces Mutual Funds That Resisted Market Exodus

OppenheimerFunds is top mutual fund holder with $6.3 billion
Mutual funds hold $15 billion of uninsured Puerto Rico debt
The biggest restructuring in the history of the U.S. municipal-bond market will fall heavily on hedge funds that wagered Puerto Rico wouldn’t go broke. But there’s plenty of little guys left holding the bag, too.

More than two-dozen mutual funds hold about $15 billion of uninsured Puerto Rico bonds, about 20 percent of Puerto Rico’s $74 billion debt, according to the most recent data compiled by Bloomberg. While that’s less than what it was more than three years ago -- before the island’s rating was cut to junk -- the figures show that smaller investors who own mutual fund shares still have a significant stake, despite a buying spree by speculators who scooped up about a third of the government’s debt when others fled.

OppenheimerFunds Inc., a unit of Massachusetts Mutual Life Insurance Co., is the biggest mutual-fund holder with $6.3 billion. Franklin Resources Inc., the second-biggest, has about $3.1 billion. UBS Asset Managers of Puerto Rico funds hold $1.4 billion, followed by those run by Goldman Sachs Group Inc., which have about $1.2 billion.

Mutual funds bought the island’s debt because it offered high-yields and was exempt from taxes across the nation.

While those investments have been jeopardized by the island’s decision Wednesday to turn to a U.S. court to restructure its debt after a series of defaults, those mutual funds will likely see little immediate impact. The Caribbean territory’s crisis has been building for two years, giving funds plenty of time to pare their exposure. And the court filing -- allowed under emergency legislation enacted by Congress last year -- had little impact on bond prices, which had already tumbled. One of the island’s most active securities, general-obligation bonds that were first sold for 93 cents on the dollar in 2014, traded for 64 cents Friday.


The variety of bond holders, however, underscores the broad reach of the commonwealth’s crisis, which will be sorted out under the supervision of U.S. District Judge Laura Taylor Swain after it proved too vast for the government to do out of court. Puerto Rico has issued many different classes of debt backed by different revenue sources: general revenue, sales taxes, utility fees -- even rum-tax money.

While analysts say it’s impossible to gauge exactly how much of their money various bondholders will get back, they won’t be totally wiped out. Before seeking out court protection, Puerto Rico offered general-obligation bondholders at least 70 cents on the dollar, with the possibility for 20 cents more if the island’s finances rebound.

Despite its stake in Puerto Rico, OppenheimerFunds’ Rochester High Yield Municipal Fund is the top-performing municipal fund over the last three years, returning 8.3 percent annualized, according to data compiled by Bloomberg. The $5.8 billion fund is a large holder of junk-rated tobacco bonds, which returned an annual 11.3% in the three years ending March 31, according to the S&P Municipal Bond Tobacco Index.

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