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  #181  
Old 11-28-2017, 11:06 AM
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Just a quick note in passing -- Stu's chemo was minorly affected by Puerto Rican concerns: at his last session, he got a glass bottle instead of a plastic bag for containing the IV chemo drug.

He had been told that many IV bags (and pharmaceuticals) are made in PR, and due to Hurricane Maria, etc., the supply was disrupted.
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  #182  
Old 11-28-2017, 11:07 AM
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but what I'm actually here to post:
https://www.wsj.com/articles/puerto-...orm-1511730516

Quote:
Puerto Rico Doesn’t Want Reform
The Promesa law, not Hurricane Maria, is the real culprit behind the island’s troubles.
Spoiler:
It has been 10 weeks since Hurricane Maria slammed into Puerto Rico. The devastation was fierce. Yet it cannot explain why almost half the generating capacity of the Puerto Rico Electric Power Authority (Prepa) is still down.

Credit for that goes to Congress, which in June 2016 passed the Puerto Rico Oversight Management and Economic Stability Act, a k a Promesa. It opened the door to debt defaults that violate the Puerto Rican constitution and U.S. law. As is always the case when the rule of law takes a back seat to politics, it has fueled chaos.

Prepa blames its disastrous post-hurricane decisions on a shortage of cash. Yet in the immediate aftermath of the storm, a group of Prepa bondholders offered the company fresh debtor-in-possession financing that included a swap of $1 billion in existing debt for $850 million in new bonds and $1 billion in new cash.

Puerto Rico rejected the offer. “The bondholders’ proposal is not viable and would severely hamper and limit Prepa’s capacity to successfully manage its recovery,” Puerto Rico’s Fiscal Agency and Financial Advisory Authority said at the time. It added that the offer had the “appearance” of “being made for the purpose of favorably impacting the trading price of existing debt.” Heaven forbid.

More unthinkable was ruining the “flat broke” image the commonwealth has been cultivating so it can write down debt and skip the matching requirements necessary to receive Federal Emergency Management Agency funds. It’s also more convenient to tap taxpayers than to borrow money from private entities asking for accountability. This is particularly true for a state-owned monopoly like Prepa, which is as much a political instrument as it is an electricity company.

When critics complained last year that Promesa would alleviate the pressure on island politicians to reform the welfare state, their concerns were pooh-poohed. Congress said Promesa’s “financial management and oversight board” would impose the discipline necessary for reform. Negotiated settlements with bondholders were to be given priority and existing restructuring agreements—like the one between Prepa and its creditors—were to be preserved.

None of this happened. According to a spokesman for the Ad Hoc Group of Puerto Rico General Obligation Bondholders, the group reached a negotiated settlement with the commonwealth in the spring. But the Promesa board nixed it. The board also vetoed an existing agreement between creditors and Prepa, in violation of Promesa guarantees.

Now the oversight board and Gov. Ricardo Rosselló are locked in a power struggle, and the board is losing.

The Prepa fiasco is instructive. Earlier this month Mr. Rosselló’s handpicked Prepa director, Ricardo Ramos, resigned amid allegations that he grossly mismanaged the hurricane recovery. As the Journal’s Andrew Scurria reported earlier this month, a $300 million no-bid contract with Whitefish Energy Holdings to restore the island’s power lacked protections for Prepa and went against the recommendations of the utility’s lawyers.

Before a House subcommittee on Nov. 14 Mr. Ramos defended his decision to hire the company, arguing that it was driven by a cash crunch. But that’s a difficult narrative to sustain.

After Mr. Rosselló canceled the Whitefish contract in late October, Mr. Ramos called on the American Public Power Association and Edison Electric Institute for help. Utility experts say that post-hurricane protocol is to go first to these industry groups, which organize “mutual assistance” from other utility companies. Mr. Rosselló has said “Prepa did not go that route . . . because they had timing issues and money issues.”

Yet mutual assistance is all about emergency response and the company could have solved its money problems by accepting the financing offer from Prepa bondholders.


Then again Mr. Ramos was a political hire and may have lacked the necessary utility experience to handle the crisis. And Mr. Rosselló almost certainly didn’t want to give creditors—whom the Promesa board has already sidelined—new leverage over an institution that, according to Puerto Rican tradition, is part of his fiefdom.

Now Mr. Rosselló is asking for $94 billion in aid from Washington for reconstruction costs. But he’s refused to implement furloughs and pension cuts mandated by the Promesa board. In August the board sued him for that. The matter was dropped after Maria hit and so was the broader board-certified fiscal plan requiring Puerto Rico to tighten its belt.

He then fought the board in court to stop it from appointing retired Air Force Col. Noel Zamot as “chief transformation officer” to run Prepa. Bondholders also objected to Mr. Zamot, citing a lack of utility experience. But Mr. Rosselló’s reasoning is that Prepa leadership must be his call. On Nov. 13 a federal judge ruled in his favor. Last week he announced the bankrupt commonwealth would pay Christmas bonuses to its employees.

And so it goes. Mr. Rosselló liked the Promesa board when it tore up contracts. But now he wants it to go away.


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  #183  
Old 11-29-2017, 05:23 PM
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http://www.cadwalader.com/news/news-...-restructuring

Quote:
Cadwalader Argues Motion for Assured Guaranty Regarding Puerto Rico’s Municipal Debt Restructuring
Spoiler:
Cadwalader is representing Assured Guaranty in connection with Puerto Rico’s restructuring of approximately $73 billion of outstanding bond debt, the largest-ever U.S. municipal debt restructuring and the first bankruptcy of any U.S. territory. Assured is one of the largest creditors of Puerto Rico, having insured approximately $5.4 billion of the bonds issued by Puerto Rico and its public corporations, including the Puerto Rico Highways and Transportation Authority (HTA).

Assured insures approximately $1.5 billion of bonds currently outstanding issued by HTA. HTA has defaulted on various debt service payments due on the bonds. On May 21, 2017, HTA filed a Title III petition under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), a federal law that incorporates various provisions of the Bankruptcy Code. On June 3, 2017, Assured along with other bond insurers filed adversary proceedings in the Title III cases against HTA, the Commonwealth of Puerto Rico, the Oversight Board established by PROMESA and other parties, seeking, among other relief, the continued payment of the HTA bonds during the Title III cases as special revenue bonds protected by the Bankruptcy Code.

Last week, on November 21, 2017, Judge Laura Taylor Swain, who was appointed to oversee the Title III cases, held over two hours of argument on the motions of the Oversight Board, the Commonwealth and HTA to dismiss the adversary proceedings.

‎Among several issues on which the Court heard argument was whether as Assured contends, the Bankruptcy Code requires the special revenue bonds issued by HTA to be paid during the Title III cases. The Oversight Board, the Commonwealth and HTA assert that payments on the bonds during the Title III cases is only an “option.” This is an immensely important issue to the municipal revenue bond market as special revenue bonds are marketed and sold as bankruptcy remote investments.

Howard Hawkins argued the motion for Assured. The courtroom team led by Mark Ellenberg also included Ellen Halstead, Tom Curtin, Casey Servais and Will Simpson.
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  #184  
Old 11-30-2017, 12:38 PM
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https://www.bondbuyer.com/opinion/ho...-holder-rights

Quote:
Commentary How the Puerto Rico dispute threatens bond holder rights

Spoiler:
The municipal bond market, for borrowers and investors alike, is fundamentally changing. Municipalities across the U.S. are struggling to provide essential services on top of skyrocketing pension and benefit obligations. In addition, although bankruptcy and default remain minimal, the Detroit bankruptcy case had a profound and sobering impact on the market, leading participants to reevaluate what a general obligation (GO), full faith and credit pledge actually means. Logically, there has been a market shift to bonds secured by a specific revenue stream – a securitized loan – as a means for issuers to enhance the attractiveness of their bonds and lower borrowing costs.


Glenn E. Ryhanych
The outcome of a highly publicized court case currently being heard by Judge Laura Taylor Swain in U.S. Municipal Bankruptcy Court under Title III of PROMESA (No. 17-00257-LTS), COMMONWEALTH of PUERTO RICO vs. COFINA, is likely to set the course for where the municipal market goes from here.

COFINA bondholders are renouncing actions taken by the Commonwealth to impair or eliminate its debt. Clearly, this would be devastating for investors, including the Puerto Rican citizens who own approximately $2.8 billion of the bonds. Impairing this debt may also impede, if not eliminate, access to funding via securitized loans.

The background: The Puerto Rico Sales Tax Financing Corporation -- in Spanish, Coporacion del Fondo de Interes Apremiante or COFINA -- was created by PR Law No. 91, as amended, to establish an entity that was independent and separate from the Commonwealth in order to address one of the worst fiscal crises in Puerto Rico’s history. In consideration for COFINA’s help in this crisis, the legislature established and assigned to COFINA a priority lien on a newly imposed, island-wide sales and use tax (SUT). A summary of Puerto Rico Act No. 56., describes the bargain:

“A special fund is hereby created to be known as the Dedicated Sales Tax Fund. The Dedicated Sales Tax Fund and all of the funds deposited therein and all the future funds that must be deposited in the Dedicated Fund pursuant to this law are hereby transferred to, and shall be the property of COFINA. This transfer is made in exchange for COFINA’s commitment to pay, all or part of the extraconstitutional debt outstanding as of June 30, 2006. The Dedicated Sales Tax Fund shall be funded each fiscal year from the first revenues of the SUT, deposited at the time of receipt and shall not be deposited in the Treasury of Puerto Rico, nor shall it constitute resources available to the Commonwealth of Puerto Rico, nor shall be available for use by the Secretary of the Treasury.”

COFINA – revenue analysis: The Sales and Use Tax (SUT) pledged to COFINA is very strong, as reflected in all but one of the elements credit analysts consider when evaluating a bond.

Demographics and Economic Base – Poor. The island has a declining population, low income levels, and high unemployment relative to the U.S. mainland.
Nature of the Dedicated Revenue – Superior. The SUT applies to a very broad list of services and essential consumer goods, is very stable, and is enforced throughout the entire island.
Revenue Analysis and Fund Flows – Superior. Fiscal year 2017 collections were a record high and double 2013 levels. A priority lien exists on collected taxes, going first to bondholders.
Debt Service Coverage – Superior. The ratio of pledged revenue to annual debt service on the senior lien bonds was 11x in fiscal year 2017.
The problem: After following the law and the set-forth payment mechanism for many years, as well as countless legal opinions attesting to COFINA’s property rights, multiple opinions rendered by the Commonwealth’s own Department of Justice, year upon year of statements by Governors, Legislators, and Development Bank officials attesting to COFINA’s rights the Commonwealth provided the following statement as part of its complaint filed with the bankruptcy court (Under Title III of PROMESA) on Sept. 8:

“This adversary proceeding is being commenced to resolve the Commonwealth-COFINA Dispute. As set forth, in this complaint, the SUT revenues, wherever located and whenever arising, are the exclusive property of the Commonwealth.”

With 25 years of experience as a municipal bond analyst and portfolio manager, I have never witnessed such apparent disregard for property rights, existing statutes, and Constitutional law. Since July 2015, while remaining current on debt payments, the Commonwealth has increasingly made bondholders uneasy by their actions and inactions with regard to COFINA’s rights and priorities. With this complaint, however, they essentially deny COFINA’s existence altogether. Even in Title III bankruptcy, the Commonwealth’s actions appear almost contemptuous of US Municipal Bankruptcy law as amended in 1988, which had the sole purpose of distinguishing between certain revenue bonds and general obligation (GO) debt. At least in this matter, it appears that promises, obligations, commitments, liens, contracts, and bargains carry little weight with the Commonwealth government.

The ramifications: Should the Commonwealth of Puerto Rico prevail, I foresee it setting a disastrous precedent.

Access to the securitized loan market could be restricted for all borrowing municipalities. This would be most damaging to state and local borrowers with weak GO ratings. Over time, this may affect higher-rated issuers as well.
Local governments and municipalities could be forced to choose between default and austerity.
The ratings of some existing revenue bonds may see multiple downgrades.
Future Puerto Rican bonds will necessitate a specific revenue pledge separate from their general fund. Oddly, this is the COFINA bond structure the Commonwealth is arguing against.
Rating agencies will have the challenge of squaring up ratings among different securitized bonds.
An alarming moral hazard would be created if interest rates (borrowing risk) are determined based on the political and judicial landscape – eschewing property rights and collateral.
Bankruptcy will become a more popular option for politicians as an “easy” short-term solution to more difficult long-term problems.
There could be a significant impact on the U.S. municipal market if the control board and the Commonwealth push through a Detroit-like bankruptcy result favoring pensioners over secured borrowers and other creditors with constitutional priority.
If a borrower’s ability to repay is in doubt, and complying with the law is optional, that borrower could be forced to pay higher interest rates, which could be a budget-busting proposition for financially fragile municipalities.
Higher government borrowing costs may crowd-out the ability to provide and maintain essential services. This could lead to higher taxes or a reduction of services, resulting in a U.S. taxpayer bailout nonetheless.
The numbers: Consider the Virgin Islands Electric and Water Authority. In July 2017, it was shunned by “once burned, twice shy” municipal investors leery of a Puerto Rico-like restructuring, leaving officials no choice but to issue a three-year note paying 10.85% interest. Contrast this with Philadelphia Gas Works Authority, which issued three-year notes yielding 1.2%. That is an interest penalty spread of 9.65%. Applying this to half of Puerto Rico’s estimated outstanding debt of $60 billion equates to an annual financial impact of $3 billion.

The bottom line: I cannot begin to imagine the current struggles for the people of Puerto Rico. Without electricity, adequate shelter, and dependable water supplies, I am at a loss to relate to the challenges people on the island face today, and for the foreseeable future. Yet, I firmly believe that if debt relief is the action taken by the Commonwealth against COFINA, it will only hurt, not help, the territory as it emerges from this crisis. The ability to raise funds to deliver needed services is one of the most broadly essential functions a government can provide, and the cost of those funds affects all citizens.

All things considered, I’m an understanding holder of Puerto Rico general obligation debt, but I’m an angry COFINA bondholder.

Policymakers and the public must recognize that bonds are not all structured the same. Each bond has very separate and unique security features which need to be considered and respected, not just in the case of COFINA, but for the overall health of the municipal bond market. For if all bonds are treated the same, and politics trump property rights and the sound application of bond analysis, then the unintended consequences will be costly and far-reaching.

In closing, as a Chartered Financial Analyst and Certified Financial Planner®, I pride myself on taking a long-term view, doing extensive research, and adhering to a moderately conservative risk profile. My clients are accepting of lower returns in lieu of lower overall portfolio volatility — and like me, they are pleased to provide capital to state and local governments in need of infrastructure development. They are not vultures or unscrupulous speculators, and I take offense to the generalization by public officials and others who insist they are – and the last thing any of us expects is to be “wiped out.” Risk is certainly a part of this business, but my hope is that we will all look to the future and craft solutions that protect not only investors and borrowers, but also our fellow citizens of Puerto Rico who desperately require our help.

The views expressed in this article are the author's own and do not in any way reflect the opinions of Spire Wealth Management. Mr. Ryhanych personally owns General Obligation, Highway & Transportation, and COFINA bonds issued by the Commonwealth of Puerto Rico.


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  #185  
Old 11-30-2017, 12:46 PM
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Quote:
Originally Posted by campbell View Post
Just a quick note in passing -- Stu's chemo was minorly affected by Puerto Rican concerns: at his last session, he got a glass bottle instead of a plastic bag for containing the IV chemo drug.

He had been told that many IV bags (and pharmaceuticals) are made in PR, and due to Hurricane Maria, etc., the supply was disrupted.
I know my physicians are dealing with a shortage of IV fluids, and where possible we are using injection rather than infusion. But I had no idea what was causing it, this makes sense.
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  #186  
Old 11-30-2017, 01:14 PM
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I keep hearing about PR and medical supplies / pharmas. Sounds like that is the single largest hit industry there, but I'm biased speaking to a few industrial insurance folks. I didn't realize it was so large there.
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  #187  
Old 11-30-2017, 02:40 PM
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Wow, what a concentration of risk.
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Old 11-30-2017, 03:07 PM
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Wow, what a concentration of risk.
That happens with too much specialization.
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Old 12-03-2017, 09:05 AM
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copying over the google-translated article:

http://periodismoinvestigativo.com/2...ema-de-retiro/

Quote:
Unmasked two of the ghost companies that claim Debt from the Retirement System
Among Retiro's creditors, there are several that promote charter schools in the United States and others that administer teacher retirement funds.
Spoiler:
Ethan Corey arrived at his home in New York after work and found an envelope in his mailbox. "Good news, it's the SV Credit documents, and I think they can help shed light on our mystery," he wrote immediately in an email. SV Credit is the name with which the second firm with the largest amount of debt within the ERS Creditors group appears in the bankruptcy case documents of the government of Puerto Rico. This alliance of eight investment firms claims $ 2 billion in bonds from the government's Retirement System.

Corey is a journalist for In These Times , which together with the Center for Investigative Journalism (CPI) has worked to find the identity and know the history of the main bondholders in the case of bankruptcy that is seen in federal court under the PROMESA law.

What the documents you found in your mailbox say, which you got after calls and paperwork with the division of corporations of the state of Delaware, is that the owner of SV Credit is the investment fund CSCP III Cayman General Partner managed by Centerbridge , a vulture firm with $ 30 billion in assets under management and co managed by Mark Gallogly , who was part of the Economic Recovery Advisory Board of former President Barack Obama.

The certificate of incorporation that finally clarifies the puzzle about who was behind SV Credit is signed by Susanne V. Clark , Centerbridge's CEO.

Like many hedge funds, this firm also administers teacher pension plans. Among his clients are the California State Teachers Association, which invested $ 250,000 in the high risk division of Centerbridge, and the Oregon State Investment Fund, which put $ 500 million in the same division. Centerbridge also manages pension plans for the states of Pennsylvania , California and Massachusetts . On the other hand, through the Centerbridge Foundation, it funds nonprofit organizations that manage charter schools , such as New Visions for Public Schools and Uncommon Schools, both in New York.

In turn, Centerbridge has a stake in Ambac Financial, an insurer of $ 1.996 billion in bonds of several entities of the government of Puerto Rico, and part of the bankruptcy case. For October, Centerbridge's participation in Ambac was $ 28 million. It is also part of a group of vulture funds that own 70% of PRISA, the company that owns the Spanish newspaper El País . That PRISA investment group, which includes other firms with Puerto Rico bonds such as Angelo Gordon, Och Ziff Capital and Monarch Alternative, rejected a 50 million euro discount on the debt of that company that is in a process of restructuring. Centerbridge is also in the middle of negotiations to finance the wind farm "Largest in Greece".

Centerbridge co-founder Mark Gallogly has a chair on the Advisory Board of the Hamilton Project, a think tank on economic policy at The Brookings Institution, as well as on the Board of Supervisors of the Columbia Business School and the Board of Directors of ROADS Charter High Schools . Since he founded Centerbridge in 2005 he has made political contributions amounting to $ 2,180,135.36, mostly to Democratic candidates and committees.

Jeffrey Aronson, with whom Gallogly founded Centerbridge, began his career as a lawyer at the firm Stroock & Stroock & Lavan, worked at the firm LF Rothschild & Co. and before co-founding Centerbridge, in 2007, was a partner at the Angelo, Gordon & Vulture fund. Co., currently a member of the Ad Hoc Group of creditors of the Electric Power Authority. Aronson is the head of the board of directors of Johns Hopkins University and a member of the boards of directors of Johns Hopkins Medicine and New York University School of Law. Since 2005 he has made political contributions of $ 377,400.00, mostly to Democratic candidates and committees.

Of the issuance of General Obligation bonds launched by the government of Puerto Rico in 2014 under scrap rating, Centerbridge requested $ 300 million and obtained $ 70 million.

He also belonged to the Ad Hoc Group of General Obligation bonds, but since he started the bankruptcy process he had not made an appearance; so far that In These Times and the CPI revealed that it runs the SV Credit fund, with which it claims $ 389,851,034 in Retiro bonds.

The CPI identified that another of the eight firms that make up the ERS Creditors, and which until now had been a big unknown, Andalusian Global Designated Activity, belongs to the vulture fund Appaloosa Management. Appaloosa held bonds from the Electric Power Authority and requested $ 300 million from the issuance of 2014 General Obligation bonds, from which they obtained $ 50 million.

Andalusian Global Designated Activity was registered in Ireland in 2011 as a "brokerage house and fund management". The address of the Andalusian headquarters is 51 John F. Kennedy Parkway, New Jersey, the same as Appaloosa.

As directors of Andalusian, appear James E. Bloin, vice president of Appaloosa since 2007, Roddy Stafford, who was director of Besaya ECA Limited, a subsidiary of Banco Santander, SA incorporated in 2011 in Dublin, Ireland, and XELO Public Limited Company, a subsidiary of Barclays PLC. For 2016, Stafford was director of at least 24 companies registered in Ireland between 2009 to 2015, and of Cardinal Health, registered in England in 2009 as a subsidiary of the multinational of the same name. Cardinal Health is a Fortune 500 health services company, with presence in Puerto Rico . The third director of Andalusian Global is Thomas Geary, who is also the director of 55 other companies.

In the document of the case of bankruptcy where the ERS Creditors firms reveal the amounts of debt they claim, Andalusian appears with the address of the law firm Matheson, in Dublin, Ireland, who have as clients "the majority of Fortune 100 companies and more of half of the 50 largest banks in the world "that do business or register in that country. Through the Andalusian Global company, Appaloosa claims $ 196 million in Retiro bonds.

Appaloosa was founded in 2003 by David Tepper and Jack Walton in New Jersey, and has in common with Centerbridge its interest in charter schools. Tepper founded the organization Better Education for Kids in 2011 , a group that advocates charter schools. In 2014, The New York Times named Appaloosa as one of the 10 largest hedge funds that have interests in that teaching system where a private company runs a public school.

Tepper is a member of the advisory committee of the Federal Reserve Bank of New York, whose task is to inform the president of the institution. The NY FED, as they call it, oversees District 2 of the Federal Reserve System, which includes Puerto Rico, and has produced several reports on the economic crisis on the island. Tepper is also a member of the trust of Carnegie Mellon University and founder of the David Tepper Charitable Foundation.

In September, Tepper made a donation of $ 3 million to the Feeding America organization for the recovery of Texas, Florida and Puerto Rico following the passage of hurricanes Irma and Maria.

Appaloosa has $ 17 billion in assets under management. Among its main investments is Alibaba Group, Chinese online trading conglomerate, where Appaloosa had shares worth $ 520 million in August 2017. For the same month, it had $ 355 million in Facebook shares.

Tepper's political contributions totaled $ 1,996,000 in 2016. His donations include $ 500,000 and $ 250,000 to the New Day for America political action committee for the candidacy of John Kasich, Republican Governor of Ohio; $ 250,000 to Right to Rise USA, created to support the presidential candidacy of Republican Jeb Bush; $ 10,200 to Boehner for Speaker. John Boehner, a Republican, was president of the House of Representatives until 2015.

In 2011, Tepper helped Matthew Knauer, a former Appaloosa analyst, and Mina Faltas, an analyst at Viking Global, both 33, to found their own hedge fund. They called it Nokota Management . Nokota requested $ 50 million from the 2014 General Obligation bond issue and obtained $ 5 million. Now they claim $ 53,675,000 in retirement bonds.

Ocher Rose is the third firm with the largest amount of bonds in ERS Creditors, but it is still a ghost company, as SV Credit and Andalusian Global have been until now. It claims $ 197,480,174 and was registered in the state of Delaware in 2015 as a limited liability corporation. The only information about this company in Title III documents is the address of its incorporating agent, Corporation Trust Center, located in Delaware.

The CPI requested a reaction from Centerbridge and Appaloosa, but none of the signatures responded to the reconfirmation and interview requests.

With experience in Puerto Rico, the largest creditor of ERS Creditors

The firm with the largest amount of debt in the ERS Creditors is Oaktree Capital, a vulture fund that claims $ 400 million through seven separate funds. The other firms in the group, in addition to Centerbridge / SV Credit and Appaloosa / Andalusian Global, are Altair Global, Glendon Opportunities, Mason Capital, Nokota Capital and Ocher Rose.

Oaktree Capital knows well the land of investments in Puerto Rico. Since 2013 they owned 50% of the operator of the Luis Muñoz Marín International Airport in San Juan, Aerostar Airport Holdings ; who acquired the airport in 2013 when it was privatized. In May 2017, Oaktree sold its stake in Aerostar for $ 430 million. In addition, it purchased $ 25 million in the emission of junk bonds of General Obligation that the government of Puerto Rico launched in 2014.

Oaktree Capital handles $ 100 billion through various funds with interests in the infrastructure, energy and real estate industries. Oaktree Capital Management, part of Oaktree Group, has 900 employees, its headquarters are in Los Angeles and it has offices in 17 cities, including London, Dubai, Hong Kong, Tokyo and Sydney. Among Oaktree's customers there are over 400 corporations, more than 350 foundations and 50 retirement plans from US governments.

Mason Capital Master Fund, registered in the Cayman Islands, belongs to Mason Capital Management, a hedge fund founded in 2000 by Kenneth Mario Garschina and Michael Emil Martino. He has interests in Reynolds American , Marathon Petroleum Corporation , HRG Group , an oil exploration company created by George HW Bush and pharmacist Rite Aid . Mason Capital has $ 3,000 million in assets under management and claims $ 141,056,428 in retirement bonds.

Glendon Capital Management, which claims $ 33,764,239 in Retiro bonds through its fund Glendon Opportunities Fund, LP, is a vulture fund created in 2013 under the patronage of Barclays bank by Matthew Barrett, former head of Barclays' risky debt division, and the former CEOs of that bank Holly Kim and Brian Berman. Before entering Barclays, the three executives worked for Oaktree Capital, another member of the ERS Creditors Group. Glendon started with $ 2.8 billion in assets under management that included Barclays capital.

Among Glendon's clients is the Los Angeles City Employees Retirement System, whose financial adviser recommended in 2014 to invest over $ 20 million in the Glendon Opportunities Fund, while the investment division of the New Jersey Department of the Treasury proposed to invest over $ 100 million in Glendon Opportunities Fund II in 2017. The main investments of Glendon Capital are in CF Industries Holding, manufacturers and distributors of nitrogen and fertilizer for the agricultural industry. It also has investments in American Realty Capital, Ally Financial and in the oil company C & J Energy. Based in California, Glendon Capital Management requested $ 15 million from the 2014 General Obligation bond issue and obtained $ 2,500,000.

Altair Global Credit Opportunities Fund (A) is a division of First Republic Investment Management managed by Hezy Shalev , a corporate lawyer of this fund that specializes in private investments and is registered as a hedge fund with the SEC. It is incorporated in Delaware and has another fund of the same name, identified as (D), incorporated into the tax haven of the Cayman Islands. Claim $ 12,735,516 in Retirement bonds.

While the ERS Creditors has the representation of Jones Day, described by Bloomberg as "Trump's favorite legal signature" since at least 14 lawyers of the firm were recruited for the team of the president of the United States, the Retreat Committee has in Title III is the representation of Robert Gordon, of the Jenner & Block firm, who was an advisor to the retirement systems of Detroit during its restructuring. In that city, the pensions of 12,000 public employees were reduced by 6.7%. They also hired Héctor Mayol Kauffmann, of the firm Benazar García & Millán, who headed the Retirement System of Puerto Rico from 2009 to 2013.


The Bondholders of the Infogram Retirement System
A derelict retirement system

The 15-story building that was the headquarters of the Retirement Systems Administration (ASR) in Hato Rey is closed due to the damage caused by Hurricane Maria. From the Ponce de León avenue and the streets that surround them, there are broken windows and the interior of some offices that were gutted as if a bomb had exploded there. According to the press officer of the retirement system, Carlos Ramos, a report is being prepared to determine if the structure was "total loss".

"We got there (to the building) on ​​May 28, 1978. I entered on August 27, 1973, when it was on Fortaleza Street, and from there we moved to Santurce, and from there we passed here, who died now, because they say that this is ... ", says Nora Betancourt, who saw the building in photographs, but did not want to go see him in person, despite the fact that he works a street below, in the Government Pensioners Association. She is a pensioner of the Retirement System, where she worked for 32 years, until 2005.

Sitting in one of the cubicles where she attends to the pensioners in the headquarters of the Association, with the noise of a plant that energizes the back office, she reviewed the benefits that she has as a pensioner, and that will not have those who enter to work in the government from now on: "contribution to the medical plan, summer bonus and $ 200 of the Christmas bonus, which became $ 600, and $ 1,000 of death for funeral expenses, for the future that is being eliminated".

The Association of Pensioners, which offers legal services, has a pharmacy and serves 52,000 members, is working only until noon due to lack of energy. In the middle of the interview with Betancourt, the plant went out, the office became semi-dark, and immediately the temperature went up. Outside, after the employees had left the office, older people were still arriving as they left when they saw the place closed.

The ASR includes the pension plans of central government employees (agencies and corporations), of teachers and of the judiciary. The Police, the Electric Power Authority and the University of Puerto Rico have separate pension plans.

The bonds claimed by the ERS Creditors firms were issued in 2008 specifically on behalf of the Central Government Retirement System. The issue was divided into three series totaling $ 3,000 million with future employer contributions as collateral for payment to the bondholders.

The administrator of the ASR at that time, Juan Cancel Alegría, said in a 2008 statement that the bond issue was made to "strengthen the financial, economic and fiscal capacity of the System; as well as addressing the actuarial deficit, extending the life of this benefit to comply with the commitment with government employees who contribute to this pension plan ".

Eight years after the issue, the ASR faced a deficit of $ 48 billion, according to the government's latest financial report published in 2016. It is now in the process of bankruptcy under Title III of PROMESA, where the group of vulture funds that make up ERS Creditors seeks to collect most of this issue in 2008. But in August 2017, Governor Ricardo Rosselló signed the "Law to Guarantee Payment to Our Pensioners and Establish a New Plan for Defined Contributions for Public Servants", which it practically eliminates the Retirement System.

This law eliminated the employer contributions that paid part of the pensions and that at the same time were the guarantee of payment for the bondholders, and established a system where the employees make a specific contribution to a personal account, similar to the 401 (K) plans. of the Federal Internal Revenue Code. Under this scheme, the contributions are the exclusive property of the participants, they are not subject to contributions or garnishment and are exempt from claims of creditors of the participant, except for debts owed to the Retirement System or to the government. The assets that are liquidated from the Retirement System would be transferred to the General Fund, from which the accumulated pensions will be paid.

"The liquidation of ASR assets has already begun and is in process. In the wake of Hurricane Maria, the building suffered significant damage and is working with insurance claims at the moment, "said Anita Gregorio, press officer of the Financial Advisory Authority and Tax Agency (AAFAF), a unit that has his charge the liquidation of the ASR.

According to the law "for this fiscal year 2017-2018, the General Fund will be disbursing approximately $ 2,000 million for the payment of accumulated pensions". The law to manage pensions also establishes that a new Retirement Board will be created, which has not yet been named, and suggests a partial privatization of the pension plan, since the Retirement Board will have to hire an "administrator entity" that manages the new defined contribution plan. This law responds in part to the requirements of the fiscal plan certified by the Fiscal Control Board, which replaces the defined retirement plans in which the employer contributes to the pension, by defined contribution plans, where only the employee contributes to what It will be your pension.

"The Administration of Retirement Systems disappeared for all purposes. The new director ( Luis M. Collazo ) is a figure ... Really (the System) became an equivalent to the 401K. The 401K is for life, but with this new modification is not for life, it is until the money that you have accumulated runs out; That is a big difference. If you ran out when you were 70 or 75 years old and you are 90 years old, then you do not have any more kids, from 75 to 90 you have to look for the kids anywhere other than the boarding house, that's the new system, "he said. Roberto Aquino García, current president of the Association of Pensioners and former president of the Board of Trustees of the ASR.

Appaloosa and Mason Capital, both from the group of firms that require payment of retirement bonuses from the ERS Creditors in Title III, are on a list of investment funds whose executives are on the boards of organizations that advocate the implementation of this type of pension plans similar to the 401K plans. In the same list, prepared by the American Federation of Teachers in 2015, there is also Third Point, a vulture fund that has had Puerto Rico bonds.

However, on June 9, before the new retirement law was signed, ERS Creditors attorney Bruce Bennett of the Jones Day firm sent a letter from Paul V. Possinger, attorney for the Fiscal Control Board. where he expresses his concern about the changes to the Retirement System. He argues that the System is an entity separate from the central government, and that PROMESA and no law allow to ignore this separation.

"Some of the changes will affect the properties of the Retirement System ... Our concerns intensified when we learned how the Retirement System issues are being handled today ... When we asked about the role of the Board of Directors of the Retirement System, Suzanne Uhlan (AAFAF attorney), said that the Board has no role, "the letter says.


Photo by: Joel Cintrón Arbasetti
Roberto Aquino García
Aquino retired after 30 years of service as auditor of the Comptroller's Office, and was chairman of the Board of Trustees of the ARS when the bond issue of 2008 was made and is now in dispute under Title III of PROMESA.

"This issue was made with the purpose of improving the situation of the Retirement System, because the money that was received was very little to be able to pay the pensioners. We had made a $ 2,000 million request to the PNP legislature from the time of Aníbal [Acevedo Vilá]. The Senate of [Kenneth] McClintock had approved it, but the House did not; There was a dam there. The System continued to pay pensions, but came to decapitalize a lot and we began to see the future of this that is happening today, "said Aquino, who also chaired the Association of Employees of ELA.

Aquino explained that before the bankruptcy process began, the Pro Pensioners Movement united all the Bonafide institutions that represent pensioners of the government that wanted to defend their benefits. As we begin the bankruptcy process, nine members of the Movement for Pensioners and White Paniagua, president of the union chapter of retired public servants States (SPU) were appointed by the trustee ( Trustee ) of the case and the Official Committee of Retirees. According to Aquino, the Movement represents almost 100,000 pensioners from various organizations.

"We are going to oppose any adjustment that is excessive, but if it is a limited adjustment that we can face, because logically we want to cooperate with the country, we do not want to be objections, we do not want to be a nuisance ... The representation has been doing everything possible for the judge to be convinced that she can not adjust our pensions, because it would cause us harm so serious that it can cause us a humanitarian crisis more than we already have, apart from (the hurricane) María, because María is a crisis huge. What I do not understand is how a country in this situation, devastated, can pay any debt. That creates a huge uncertainty for me and creates many pensioners who think like me, and creates an anguish ... If we are in these conditions, with what money we will pay the debt. "

"The bondholders logically want their kids but the bondholder knew that when he invested he had two bags: the one to win and the one to lose. We do not. We worked 30 years minimum to have a pension, contributing money from our pocket and not only that, with the commitment of the government that we would pay a pension in the future and that pension was until one died, "said Aquino.



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Old 12-19-2017, 12:03 PM
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https://www.bloomberg.com/news/artic...-account-tally

Quote:
Puerto Rico Finds $5 Billion More Cash in Latest Disclosure
Newest tally includes accounts left out of previous report
‘It leaves me speechless,’ former Puerto Rico bondholder says
Spoiler:
Puerto Rico said it had $5 billion more in cash than disclosed three weeks ago after scouring more than 800 government bank accounts, underscoring the murky financial reporting that’s complicated the bankrupt island’s effort to emerge from a crippling debt crisis.

The territory on Monday said it had $6.9 billion at the end of November, according to a securities filing that includes several accounts that were left out of the previous disclosure. That new tally, which is up from $1.73 billion reported on Dec. 1, comes just days after a judge ordered the government to turn over more financial data to bondholders who have long complained about a lack of reliable information.

That has proven an obstacle to Puerto Rico’s negotiations with creditors and complicated the effort by federal officials to help craft a turnaround plan that will determine how much of the government’s $74 billion debt can be repaid. The crisis has been rendered even worse by the devastation brought by Hurricane Maria in September.

“This 11th hour release of financial data, which follows more than a year of the commonwealth and the oversight board stonewalling creditors on even the most basic issues of transparency, raises far more questions than it answers," said Andrew Rosenberg, an attorney with Paul Weiss Rifkind Wharton & Garrison who is representing a group of bondholders. "The commonwealth has not leveled with the public, the court, or its creditors about the state of Puerto Rico’s finances.”


The federal oversight board said in a statement Monday that it would start a forensic investigation of the government’s accounts and plans to hold a hearing in January on how the funds may be used. The governor’s representative on the panel, Christian Sobrino, said the latest disclosure is more comprehensive than prior reports and shows the previously undisclosed cash of several public entities beyond the central government.

"This shows the whole snapshot of the government accounts," he said in a telephone interview. "When we published the disclosure of this document, we said the next step in our review process is an independent review of the bank accounts and we would want the involvement of the oversight board and creditor groups."

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A Tale of Two Puerto Ricos
Bloomberg follows an ad hoc crew of volunteers as they try to help Puerto Rico recover from devastating hurricanes.

(Source: Bloomberg)
The price of the government’s securities were little changed after the disclosure. The island’s benchmark general-obligation bonds due in 2035 traded at an average price of 22 cents on the dollar Monday in light trading.

A fund for immediate cash needs of Puerto Rico’s central government had $1.5 billion as of Dec. 14, down from $1.643 million on November 30, the filing showed. Puerto Rico’s electric utility had $545 million and the sewer utility had $327 million as of Dec. 8, compared with about $600 million and $340 million, respectively, at the end of last month.

The head of the government’s fiscal agency, Gerardo Portela, said this month that the island’s electric and sewer utility would run out of cash in December and needed federal loans to keep operating. In an interview Monday, Sobrino said that the disclosure did not change the agencies’ need for cash and includes funds to which the government does not have full access.

"The balances that we’re showing in the report include restricted accounts," he said. "In terms of the operations, they are in dire need of cash."

Despite officials’ claims that some of the island’s agencies were running low on funds, the governor’s administration said it would pay about $113 million in legally-mandated Christmas bonuses to its public employees, including first responders who worked on recovery efforts in the aftermath of the storm.

In an interview last month in San Juan, oversight board member David Skeel said that one of the most difficult components of coming up with the first fiscal plan was finding reliable baseline numbers.

David Tawil, president and co-founder of Maglan Capital, a former Puerto Rico bondholder, said Monday’s disclosure will be welcome news to some creditors because it reveals there are more resources, though it may also raise other questions about the proceedings.

"People are trying to figure out what this number means," he said. "Even with all the mismanagement that has been alleged, even with all the cloud over the books and records, even with the allegations that the government has obfuscated their accounts -- it’s still a huge number."

"If this was a corporation and they reported this number, heads would roll," he said. "It leaves me speechless. It just leaves me wondering what else we don’t know."


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