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

[Gandhi]

I actually think this is a decent middle ground. PR gets some chance at rebuilding. Pensions and the people relying on them don't get the shaft. Retailer investors get something.

Yes, the big banks aren't getting anything out of this but after 2007, I don't think they have much of an argument for unfair treatment considering how we bailed out their industry.

Agree with the sentiment just not the implementation.

 

[LangfordBarrow]

I actually think this is a decent middle ground. PR gets some chance at rebuilding. Pensions and the people relying on them don't get the shaft. Retailer investors get something.

Yes, the big banks aren't getting anything out of this but after 2007, I don't think they have much of an argument for unfair treatment considering how we bailed out their industry.

You are moderate though. Hope we all could think like this.

 

[mommas homeboy]

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.

Very convincing argument. The only thing that would make me question it is doing research to find out if, in fact, the Puerto Rican government was lied to or mislead by these “vulture” investors.

I’m guessing the answer is no, but it’s just SO much easier to make the Puerto Rican government and voters look like victims.

 

[GSP_37]

If you spend more money on yourself than you have or earn, doesn't that make you the greedy one rather than the ones who lent you money?

I vaguely remember CNBC reporting Greece had shorter work week, generous pay and benefits, tax cheaters, and big debt.

 

[Arkain2K]

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

Just in case anyone are wondering who are the "vultures" that invested in Puerto Rico's triple tax-exempted Municipal bonds, lured by the lucrative sales-tax backing guarantee and generous interest rates offered by the Puerto Rican government themselves.

Who owns Puerto Rico's mountain of debt? You do
By Matt Egan | October 9, 2017

Looming in the background of Puerto Rico's humanitarian crisis is a mountain of debt.

Long before Hurricane Maria left millions on the island without power or water, Puerto Rico was battling a financial crisis years in the making. Puerto Rico's crippling debt load -- totaling $73 billion -- forced the island to file in May for the biggest U.S. municipal bankruptcy in history.

President Trump pointed out Puerto Rico's "massive debt" problems on Monday. Puerto Rico, Trump tweeted, owes "billions of dollars" to "Wall Street and the banks, which, sadly, must be dealt with."

In reality, most of that money is owed to everyday investors. Less than 25% of Puerto Rican debt is held by hedge funds, according to estimates by Cate Long, founder of research firm Puerto Rico Clearinghouse.

The rest of the debt is owned by individuals and mutual funds that are held by mom-and-pop investors.

"For the most part, Main Street America owns this debt," Long said. "It's not as though these are vultures circling around the island."

Investors piled into Puerto Rican bonds over the last decade, enabling the island's unsustainable spending-spree along the way. They kept buying Puerto Rican debt even as the island fell into an 11-year recession that deepened the debt crisis. High unemployment forced hundreds of thousands of residents to flee the island, further eroding the tax base.

These risks forced Puerto Rico to pay high rates that lured bond investors searching for healthy returns in a world of historically-low interest rates. Another bonus: Puerto Rico's debt is "triple tax-exempt." That means owners of the bonds don't face federal, state or local taxes on the interest they earn.

Nearly 300 bond mutual funds own Puerto Rican debt, according to data compiled by Morningstar. Some of the biggest holders include mutual funds run by household names like OppenheimerFunds, Franklin Templeton, Goldman Sachs, BlackRock and T. Rowe Price.

'Maddening process'

Up until now, Puerto Rico's messy battle with its bondholders has played out in court, with dozens of cases being fought by parties that often have competing interests.

This "maddening process" makes it "so bloody hard to get any kind of resolution," said John Rousseau, director of fixed income at Cumberland Advisors. The Florida firm manages about $150 million of insured Puerto Rican bonds owned by individuals.

The devastation wrought by Hurricane Maria has shined a bright light on this glacial process that threatens to complicate the island's recovery efforts by cutting the territory off from borrowing money for years.

There is hope that Hurricane Maria -- and the federal attention it requires -- could be the catalyst to break the logjam.

Long said that the tweets from Trump, who has ample bankruptcy experience himself, may signal he's willing to bring the various parties to the bargaining table to reach a deal.

"Puerto Rico cannot go forward with all of this litigation hanging over it," Long said.

Of course, reaching a deal to renegotiate Puerto Rico's debt means that bondholders will have to take losses, known as "haircuts." Bondholders, most of whom haven't been paid for over a year, have long realized there will be losses. Some have already agreed to take them.

PREPA, the island's electric utility, filed for bankruptcy in July after Puerto Rico's oversight board rejected a restructuring agreement with bondholders.

https://money.cnn.com/2017/09/27/investing/puerto-rico-debt-who-owns-trump/index.html

 

[mommas homeboy]

Just in case anyone are wondering who are the "vultures" that invested in Puerto Rico's bond, lured by the lucrative interest rates and triple-tax-exempt status.

Who owns Puerto Rico's mountain of debt? You do
By Matt Egan | October 9, 2017

Looming in the background of Puerto Rico's humanitarian crisis is a mountain of debt.

Long before Hurricane Maria left millions on the island without power or water, Puerto Rico was battling a financial crisis years in the making. Puerto Rico's crippling debt load -- totaling $73 billion -- forced the island to file in May for the biggest U.S. municipal bankruptcy in history.

President Trump pointed out Puerto Rico's "massive debt" problems on Monday. Puerto Rico, Trump tweeted, owes "billions of dollars" to "Wall Street and the banks, which, sadly, must be dealt with."

In reality, most of that money is owed to everyday investors. Less than 25% of Puerto Rican debt is held by hedge funds, according to estimates by Cate Long, founder of research firm Puerto Rico Clearinghouse.

The rest of the debt is owned by individuals and mutual funds that are held by mom-and-pop investors.

"For the most part, Main Street America owns this debt," Long said. "It's not as though these are vultures circling around the island."

Investors piled into Puerto Rican bonds over the last decade, enabling the island's unsustainable spending-spree along the way. They kept buying Puerto Rican debt even as the island fell into an 11-year recession that deepened the debt crisis. High unemployment forced hundreds of thousands of residents to flee the island, further eroding the tax base.

These risks forced Puerto Rico to pay high rates that lured bond investors searching for healthy returns in a world of historically-low interest rates. Another bonus: Puerto Rico's debt is "triple tax-exempt." That means owners of the bonds don't face federal, state or local taxes on the interest they earn.

Nearly 300 bond mutual funds own Puerto Rican debt, according to data compiled by Morningstar. Some of the biggest holders include mutual funds run by household names like OppenheimerFunds, Franklin Templeton, Goldman Sachs, BlackRock and T. Rowe Price.

'Maddening process'

Up until now, Puerto Rico's messy battle with its bondholders has played out in court, with dozens of cases being fought by parties that often have competing interests.

This "maddening process" makes it "so bloody hard to get any kind of resolution," said John Rousseau, director of fixed income at Cumberland Advisors. The Florida firm manages about $150 million of insured Puerto Rican bonds owned by individuals.

The devastation wrought by Hurricane Maria has shined a bright light on this glacial process that threatens to complicate the island's recovery efforts by cutting the territory off from borrowing money for years.

There is hope that Hurricane Maria -- and the federal attention it requires -- could be the catalyst to break the logjam.

Long said that the tweets from Trump, who has ample bankruptcy experience himself, may signal he's willing to bring the various parties to the bargaining table to reach a deal.

"Puerto Rico cannot go forward with all of this litigation hanging over it," Long said.

Of course, reaching a deal to renegotiate Puerto Rico's debt means that bondholders will have to take losses, known as "haircuts." Bondholders, most of whom haven't been paid for over a year, have long realized there will be losses. Some have already agreed to take them.

PREPA, the island's electric utility, filed for bankruptcy in July after Puerto Rico's oversight board rejected a restructuring agreement with bondholders.

https://money.cnn.com/2017/09/27/investing/puerto-rico-debt-who-owns-trump/index.html

This article is just more evidence that Liberals are lying piles of shit. They would deny all this information straight to your face, while at the same time, screaming with anger and hate at these ruthless “vultures” shamelessly “preying on the poor Puerto Rican victims.”

 

[Arkain2K]

This article is just more evidence that Liberals are lying piles of shit. They would deny all this information straight to your face, while at the same time, screaming with anger and hate at these ruthless “vultures” shamelessly “preying on the poor Puerto Rican victims.”

Fortunately, the general breakdown of Puerto Rico's debt was widely publicized three years ago, even before the PROMOSA proceedings, so I assume most people who prefer to read real financial news over manufactured rage baits on this subject mater already have a general idea that everyday American people are the ones who hold most of Puerto Rico's $73 Billion debt.

This is also why I kept putting "Greedy Vultures" and "Capitalist Pigs" in quotation marks in my posts through out this thread, to differentiate between reality and the Puerto Rican Victims vs. Evil Greedy Vultures narrative currently being pushed.

If this bill is passed and a mere $7.5 Billion will be used to pay for ALL individual investors on the main land, who actually invested their own money to buy a whopping 75% of Puerto Rico's issued Municipal Bonds, rest be assured that the "Greedy Vultures" on Wall Street wouldn't be the biggest group that will lose nearly all their life savings, despite what Senator Warren and Sanders wants you to think.

To sums it all up:

Governor Padilla likes to say that Puerto Rico should not have to choose between paying its police and teachers or paying its creditors. But a lot of retirees and "regular Joe's" own Puerto Rico's debt on the other end.

https://money.cnn.com/2015/07/01/investing/puerto-rico-bond-holders/index.html?iid=EL

 

[mommas homeboy]

Fortunately, the general breakdown of Puerto Rico's debt was widely publicized three years ago, even before the PROMOSA proceedings, so I assume most people who prefer to read real financial news over manufactured rage baits on this subject mater already have a general idea that everyday American people are the ones who hold most of Puerto Rico's $74 Billion debt, not some rich bankers all the way on Wall Street.

This is also why I kept putting "Greedy Vultures" and "Capitalist Pigs" in quotation marks in my posts through out this thread, to differentiate between reality and the Puerto Rican Victims vs. Evil Greedy Vultures narrative currently being pushed.

If this bill is passed and a mere $7.5 Billion will be used to pay for ALL individual investors on the main land, who actually invested their own money to buy a whopping Two-Thirds of Puerto Rico's issued Municipal Bonds, rest be assured that the "Greedy Vultures" on Wall Street wouldn't be the biggest group that will lose nearly all their life savings, despite what Senator Warren and Sanders wants you to think.

To sums it all up:

What I’m wondering is this: how much benefit did Puerto Rico get from selling those bonds with high interest rate guarantees?

If they hadn’t sold them, would they really be better off than they are now? I get the feeling that selling those bonds saved their asses, and they would have had the same crises much sooner if receiving that investor $ hadn’t been an option.

Also, the investors do deserve some blame. Not for being evil, but for being stupid enough to believe Puerto Rico would pay them back all they’re owed.

 

[GSP_37]

How is racking up a ton of debt and not repaying it different from robbing a bank or going door to door scamming people out of money for some fake charity?

 

[VivaRevolution]

Here is the real story.

Bernie and Warren aren't doing this for votes. Not enough votes in PR to make a difference.

They are doing this because they care.

Name me a Republican that cares.

Just one.

 

[VivaRevolution]

How is racking up a ton of debt and not repaying it different from robbing a bank or going door to door scamming people out of money for some fake charity?

Because the banksters gave the money away, and have a responsibility to only give loans they thought would be paid back.

When people can't pay it back. That is called tough shit.

 

[Arkain2K]

Federal Judge rules that bankrupt Puerto Rico’s bondholders can sue the United States for losses incurred by PROMESA
Breck Dumas | Jul 16, 2018

A federal judge ruled on Friday that hedge fund creditors of Puerto Rico’s debt can sue the United States government for the losses incurred by the investors.

Chief Judge Susan Braden of the United States Court of Federal Claims issued the decision.

What’s the situation?

The bondholders — which include hedge funds Oaktree Capital Management LP, Glendon Capital, and others — say the feds set them up for losses when they passed a law that restructured Puerto Rico’s debt.

Signed by President Obama, the legislation known as the 2016 Puerto Rico Oversight, Management, and Economic Stability Act was designed to avoid placing taxpayers on the hook for Puerto Rico’s $73 billion in debt. But in turn, investors say, PROMESA left bondholders with the tab after restructuring was done by the Fiscal Control Board created by the law.

Braden’s ruling addressed $3 billion in pension bonds which the territory sold in 2008 in an attempt to remain solvent. But after the passing of PROMESA, bondholders were unable to collect contributions to the system in order to be made whole.

Anything else?

Hedge funds aren’t the only investors concerned about the handling of Puerto Rico’s debt crisis. According to the founder of research firm Puerto Rico Clearinghouse, Cate Long, less than 25 percent of the territory’s debt is held by hedge fund managers. The rest is held by individuals and mutual funds held by everyday investors.

She told CNN last year, “For the most part, Main Street America owns this debt. It’s not as though these are vultures circling around the island.”

https://www.theblaze.com/news/2018/...o-ricos-bondholders-can-sue-the-united-states

 

[Arkain2K]

Some words of wisdom from the rising Socialist star:



1) Unless she's talking about a completely Marshall Plan I didn't know about, the one implemented in Europe after World War II is nothing like what Senator Warren and Sanders are proposing. The Marshall Plan is hailed as the greatest structural adjustment program in history, whereas this proposed band-aid of robbing Peter to pay Paulo does fuck all for the much-needed long term structural adjustment of Puerto Rico at the institutional level.

2) The average everyday Americans who spent their life-savings to buy 75% of the municipal bonds offered by the Puerto Rican government must be thrilled to hear that she suspects their investment to be "illegal". Too bad she's incapable of clarifying which American or Puerto Rican laws were broken in these very public bond transactions in the open market.

3) PROMESA wasn't "imposed" on Puerto Rico against their will. They begged Congress to enact this process to help them deal with the impending bankruptcy. Go ahead and take that away and see what happens.

4) Puerto Ricans have been fully utilizing their right for self-determination all this time: the home-grown leaderships who got Puerto Rico into this mess in the first place was chosen by the Puerto Ricans, and who elected all the subsequent Governors and Mayors who would surely lead them out of the quagmire of their own doing in the last 25 years but Puerto Ricans?

I know people like Warren, Sanders, and Cortez may think their victimhood-laden rhetoric would help Puerto Rico's case, but I'm afraid their innate need to blame everything and everyone else for Puerto Rico's self-inflicted misery is ensuring that this self-destructed island will never, ever be accepted as a U.S State.

 

[Pelosi2020]

Bernie and Warren aren't doing this for votes.

They are doing this because they care.

WRONG!

Defrauding investors is Bernie Sanders’ favorite sport:
https://www.cbsnews.com/news/bernie...bi-investigation-for-bank-fraud-hire-lawyers/

 

[Gandhi]

This article is just more evidence that Liberals are lying piles of shit. They would deny all this information straight to your face, while at the same time, screaming with anger and hate at these ruthless “vultures” shamelessly “preying on the poor Puerto Rican victims.”

Couple of points to consider re “liberals are lying POS”.

The Sanders / Warran bill explicitly recognizes that a large portion of debt is from mutual fund retail investors and pension plans. That’s why it gives them pennies on the dollar (only if the mutual fund company agrees to take no fees again L O L at that) while it gives the hedge funds exactly zero.

In addition you have a liberal in this thread saying that their approach is the wrong one. Unless we want debt markets to change radically, all debt holders need to treated exactly the same unless there is a difference in priority as established by bankruptcy law.

In any case there has to be a massive debt reduction here. It’s the only way forward, and all debt holders should have known the risks.

Finally as an aside the right has no high horse to ride over liberals anymore when it comes to respect for market principals. Their shriekers are in the White House starting trade wars and running up record fiscal deficits during an economic boom.

 

[VivaRevolution]

Some words of wisdom from the rising Socialist star:



1) Unless she's talking about a completely Marshall Plan I didn't know about, the one implemented in Europe after World War II is nothing like what Senator Warren and Sanders are proposing. The Marshall Plan is hailed as the greatest structural adjustment program in history, whereas this proposed band-aid of robbing Peter to pay Paulo does fuck all for the much-needed long term structural adjustment of Puerto Rico at the institutional level.

2) The average everyday Americans who spent their life-savings to buy 75% of the municipal bonds offered by the Puerto Rican government must be thrilled to hear that she suspects their investment to be "illegal". Too bad she's incapable of clarifying which American or Puerto Rican laws were broken in these very public bond transactions in the open market.

3) PROMESA wasn't "imposed" on Puerto Rico against their will. They begged Congress to enact this process to help them deal with the impending bankruptcy. Go ahead and take that away and see what happens.

4) Puerto Ricans have been fully utilizing their right for self-determination all this time: the home-grown leaderships who got Puerto Rico into this mess in the first place was chosen by the Puerto Ricans, and who elected all the subsequent Governors and Mayors who would surely lead them out of the quagmire of their own doing in the last 25 years but Puerto Ricans?

I know people like Warren, Sanders, and Cortez may think their victimhood-laden rhetoric would help Puerto Rico's case, but I'm afraid their innate need to blame everything and everyone else for Puerto Rico's self-inflicted misery is ensuring that this self-destructed island will never, ever be accepted as a U.S State.

Debt isn't real. Money isn't real.

That hurricane was real.

You blaming Puerto Ricans for a hurricane?

 

[nostradumbass]

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

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

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

Reductions in military spending? It's double the cost of the entire military budget. There could be a pretty penny taken in if they taxed the shit out of endowments, that is true, and if that's how he plans to pay for it, be my guest, but those would dry up before long when people stop donating as much and then up go the taxes on everybody.

And let's be clear, he's trying to do ALL of these.

 

[flashNsmash]

apologize for bruiser brody first and then and only then can we discuss the debt

 

[Arkain2K]

Two Budgets, One Puerto Rico: Fiscal Spat May Be Bound for Court
Bloomberg | Jul 02, 2018​

​

(Bloomberg) -- Puerto Rico Governor Ricardo Rossello called for compromise Monday between the island’s legislature and its federal oversight board as a spat over the budget appeared bound for court.

The conflict started when the legislature last month refused to repeal a labor law that protects workers from unjustified dismissal. The oversight board had demanded the reform to, in theory, make the economy more attractive to investment, and Rossello -- as part of a larger compromise over how to overhaul the territory -- promised that the government would deliver. But the legislature went rogue, including leaders from Rossello’s own political party.

As a result, the compromise appeared dead as of Monday, and both sides acknowledged reluctantly that critical questions for the island’s future -- including the budget -- may have to be settled by a judge. In what some called an act of political brinksmanship, the legislature approved its own version of the budget, without the labor reform, knowing that it wouldn’t be considered compliant with the federal law that gives the oversight board power over the budget.

"There’s a lot at stake," Rossello said Monday in San Juan, where he was attending an event to announce an investment in the film industry. "It’s imperative that we take the right action."

Rossello seemed to think little of Puerto Rico’s chances of winning such a court battle, saying Monday that the federal law called Promesa -- under which the oversight board was created -- made clear the board’s power in matters of the budget. He said compromise was critical to create a sense of predictability around the island’s future.

"If we could arrive at an agreement to achieve that, of course that would be a much better path," Rossello said.

But he also said that he had signed the legislature’s budget and that, for the time being, that was the version that was in effect. The board’s budget was unacceptable, he said.

Puerto Rico has defaulted on its bonds and is faced with $120 billion in debt and pension obligations that it can’t pay after muddling through a decade of recession and then being pummeled by Hurricane Maria. But the oversight board installed as part of that process has repeatedly drawn the ire of residents and local politicians, due to its proposed program of austerity, such as ending Christmas bonuses, and business-friendly changes.

Oversight board members said Friday that they viewed the labor reform as essential to the island’s transformation. After adjusting its expectations because of the legislature’s rejection of its recommendation, the body expects a $14 billion cumulative primary surplus over 30 years, compared with a $39 billion projected surplus under the previous scenario.

Defaulted Puerto Rico bonds due 2035 fell 3 cents to about 38 cents on the dollar Monday.

https://m.investing.com/news/econom...spat-may-be-bound-for-court-1515395?ampMode=1

 

[Arkain2K]

Puerto Rico reaches deal to restructure $3B of power utility's debt
By DANICA COTO, Associated Press | July 30, 2018

Puerto Rico's government reached a deal Monday night with a bondholder group to restructure more than a third of the debt owed by its troubled power company as the utility moves toward privatization.

A federal control board overseeing the U.S. territory's finances called it an "important milestone" and promised the deal would not hit Puerto Ricans with rate increases to cover debt service if there was a drop in power usage.

Officials said bondholders that hold more than $3 billion in debt from Puerto Rico's Electric Power Authority would exchange it for two new bonds. One would be exchanged at 67.5 cents on the dollar, while the other would be exchanged at 10 cents on the dollar and would be linked to Puerto Rico's economic recovery.

"That is absolutely huge," economist Vicente Feliciano told The Associated Press.

The deal marks the first time Puerto Rico will not pay a revenue bond in full, and it could have consequences beyond the U.S. territory, including higher interest rates on those types of bonds, he said.

The bondholder group whose clients include OppenheimerFunds and Knighthead Capital Management said in a statement that addressing the power company's debt can speed up the utility's transformation and viability.

"Our recoveries are now tied to PREPA's sustainable success," the group said.

Puerto Rico legislators are expected to soon approve several measures that will allow the Puerto Rico's government to privatize the generation of power and award concessions for transmission and distribution.

Economist Gustavo Velez told AP that the debt restructuring deal will make it easier to find a buyer, in addition to possibly leading to similar agreements for those holding general obligation bonds and sales-tax bonds. Overall, Puerto Rico has more than $70 billion in public debt, and a federal judge overseeing the territory's bankruptcy-like process has to approve all restructuring deals, which Velez said are key for the island to overcome its economic crisis.

"Puerto Rico needs to accelerate all these restructurings to return to the capital markets as quickly as possible," he said.

The announcement comes just days after a new CEO was appointed to lead Puerto Rico's power company, the fifth one since Hurricane Maria destroyed up to 75 percent of the island's transmission lines. Some 200 customers remain in the dark more than 10 months after the hit as Puerto Rico struggles to emerge from an 11-year recession.

https://www.newsobserver.com/news/business/article215816320.html