Madagascar Development

The effort to relieve, or bail out, the U.S. commonwealth of Puerto Rico from its current economic struggles has just received a big boost from the Obama administration. U.S. Treasury Secretary Jacob Lew has said that allowing Puerto Rico the opportunity to file for bankruptcy will, in fact, help the island get out from under the $72 billion in public debt that has buried it. Lew said: A central element of any federal response should include a tested legal bankruptcy regime that enables Puerto Rico to manage its financial challenges in an orderly way. Puerto Rico is entering its ninth year in recession, and the administration of Gov. Alejandro García Padilla has been pushing for the right of its public agencies to file for bankruptcy under Chapter 9, but the proposal has not drawn any Republican co-sponsors. Leading House Republicans have said they worry that allowing such access would not solve Puerto Rico’s financial difficulties, and Garcia traveled to the U.S. to meet with legisl

The commonwealth of Puerto Rico and the municipal-bond mutual fund market were thrust back in the headlines in recent weeks as Gov. Alejandro Garcia Padilla warned that the U.S. territory couldn't pay its $72 billion of debt. In this article, we'll provide context around the announcement, review which mutual funds own significant amounts of Puerto Rico bonds, and discuss what investors can expect moving forward. Key Takeaways The financial crisis of the commonwealth of Puerto Rico continues to worsen, creating heightened risk for investors in the island's $72 billion of debt. The commonwealth's municipal bonds have been attractive to many mutual funds thanks to their higher yields and "triple tax-exempt" benefits. Although investors might expect to find the highest concentrations of this debt in high-yield municipal funds, some of the largest allocations are in single-state funds. With those funds' higher yields comes a higher risk of potential losses.

Investors are bracing for Puerto Rico to miss about $58 million in bond payments in coming days, as the U.S. commonwealth attempts to restructure $72 billion of debt. Saturday’s deadline could mark the first skipped payment to bondholders since Gov. Alejandro Garcia Padilla last month said that the island’s debts were unsustainable and urged negotiations with creditors. Because Saturday is a weekend, payment can be made Monday, a spokeswoman for Puerto Rico said. Public Finance Corp., a financing unit for Puerto Rico’s government, this month notified holders of appropriation bonds, typically those backed by funds set aside by the legislature, that it hadn’t transferred money to a trustee to pay the debt due at the beginning of August. The corporation said the legislature never actually appropriated the funds. The missed transfer led some ratings firms to say the island was highly likely to default. Some bonds from Public Finance Corp. maturing in 2031 touched a record low below 12 c

Reducir a 15 los días de vacaciones pagas para el sector público y privado, aumentar el periodo probatorio a dos años, alterar la forma en que se pagan las horas extra y eliminar los bonos a los empleados al final del año son algunos de los lineamientos básicos que regirán el plan fiscal a cinco años, según datos oficiales del Gobierno a los que Metro tuvo acceso. El documento —un bosquejo que delinea lo que será el plan fiscal a largo plazo y que se basa mayormente en las recomendaciones del informe Krueger— destaca que el plan se dividirá en cuatro renglones. El primero es la reforma estructural, que incluye cambios a ciertas leyes para reducir los costos laborales; cambios para reducir los costos energéticos, como abrir la generación a la competencia privada para reducir las tarifas; buscar la derogación de las leyes de cabotaje y liberalizar la competencia y precios para reducir los costos de transportación. También incluye una reforma  en los beneficios sociales (welfare) y obli

Debt-ridden Puerto Rico faces its next big test in just a few days, when $58 million in bond payments come due — and already the government is mounting a defense against the possibility that it will not have the cash. Government advisers on the island have been sending memos to the news media over the last several days suggesting that even if the government cannot make the payments, it will not technically be in default — something Puerto Rico is desperately trying to avoid. A default would have enormous legal and financial consequences, putting the United States commonwealth in the uncomfortable company of Greece. The payments coming due are on so-called moral obligation bonds, which the government can issue without any legal requirement to repay. Despite the advisories from Puerto Rican officials, however, independent financial experts said even a small nonpayment, whether it is technically a bond default or not, would have major reverberations. Failing to pay the moral obligation

As Puerto Rico teeters on the edge  of default, a new report commissioned by a group of hedge funds insists the U.S. territory can avoid bankruptcy if it lays off teachers, sells off many of its public assets and collects more taxes. If the government tries to restructure or avoid paying its debts, it will be sued and the crisis in confidence that follows will make things much worse for the island, an author of the  report  argues. ASSOCIATED PRESS Puerto Rico Gov. Alejandro García Padilla announced June 29 that the commonwealth would not be able to pay back its $72 billion debt as it is currently structured. He also said Puerto Rico's municipal governments and public corporations should be allowed to declare bankruptcy. Federal law currently excludes Puerto Rico from taking that course of action, though it is open to all 50 U.S. states. A report  commissioned by Puerto Rico's government released that same day recommended debt restructuring as well as cuts in the minimum

Puerto Rico’s worsening debt crisis only seems to whet the appetite of a small but devoted group of distressed investors. Hedge-fund manager John Paulson last week added to his hotel collection on the island by acquiring San Juan Beach Hotel out of bankruptcy. He paid $9.5 million for the 96-room hotel in the Condado district of capital city San Juan, according to bankruptcy court filings. He plans to invest an additional several million dollars to transform the property, which closed its doors to the public earlier this month, into a boutique luxury hotel, according to people familiar with Mr. Paulson’s plans. The upgrade is following a familiar script for hospitality investors on the island. They believe even if a number of dated or low-rent hotels have been struggling, higher-end and revamped properties can still draw an affluent beach-seeking crowd. Rooms at the super-lux Ritz Carlton Reserve, for example, start above $1,000 a night with suites listed on its website for $2,500

As yet another key debt payment date closes in on Puerto Rico , here's a primer on what you should know, and who it will affect the most ahead of the deadline. Q: If the Puerto Rico Public Finance Corporation (PFC) doesn't pay bondholders on Aug. 1, will it be considered a default? A: Yes. According to Moody's vice president and senior credit officer, Ted Hampton, if there is no payment made on Friday, it will be the first default of a U.S. state, or state-like entity, since Arkansas couldn't make its bond payments during the Great Depression in 1933. Q: What should Puerto Rico's bondholders do? A: The outlook for Puerto Rico bondholders is rather bleak, said Nick Venditti, a portfolio manager at Thornburg Investment Management. "If you're an investor in a heavily overweighted Puerto Rico municipal bond mutual fund, or have direct exposure to Puerto Rico's debt, your best-case scenario is to sell right now," Venditti said. "Y

La administración del presidente de Estados Unidos, Barack Obama, solicitó hoy al Congreso federal que apruebe el proyecto de ley que busca incluir a las corporaciones públicas de Puerto Rico en el capítulo 9 de la Ley federal de Quiebras, de manera que se puedan reestructurar los pasivos “insostenibles”, reportó hoy Reuters . En una carta firmada por el secretario del Tesoro, Jack Lew, y enviada al presidente del Comité de Finanzas del Senado, el republicano Orrin Hatch, se indica que “al conceder acceso a Puerto Rico a un régimen de quiebra ordenada lo más pronto posible, el Congreso puede ayudar a poner a la Isla —y a los millones de ciudadanos americanos que allí viven— en el mejor camino para una recuperación sostenida”. Actualmente, la Cámara federal tiene ante su evaluación el proyecto HR-870, de la autoría del comisionado residente, Pedro Pierluisi, que solicita incluir a Puerto Rico en el capítulo 9 de la Ley federal de Quiebras. Un proyecto similar fue presentado en el Sena

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. Puerto Rico can avoid a sweeping restructuring of its sprawling   $72bn debt pile   by focusing on eliminating its deficit and borrowing in the short term, according to a report commissioned by an ad hoc group of the island’s bondholders and authored by three former International Monetary Fund economists. The report released late on Sunday represents the first major salvo from the bondholders group which represents 38 investment groups — including hedge funds girded for a battle against any writedown of their debt — and $5.2bn of mostly government-guaranteed and tax-supported debt. High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our   Ts&Cs   and   Copyright Policy   for more detail. Email   ftsales.support@ft.com   to buy additional

Economists working for a group of hedge funds and other firms with major investments in Puerto Rican bonds said Sunday night that the government could solve its debt crisis largely by stepping up tax collections and obtaining additional financing over the next two years. The message of sustainability is sharply at odds with the recent announcement by Puerto Rico’s governor, Alejandro García Padilla, that the commonwealth’s debt is “unpayable.” The face value of the territory’s outstanding municipal bonds is about $72 billion. In addition, it has about $40 billion of unfunded pension obligations to public workers on the island, and other unpaid bills. The governor is seeking a moratorium on bond payments. “There may be an issue of liquidity in the short term,” in Puerto Rico, “but the debt itself, in global terms, is sustainable,” said Claudio Loser, the chief executive of Centennial Group Latin America, which will officially release its report Monday morning. The consulting firm, ba

Puerto Rico's government announced Friday that overall general fund revenue collected this past fiscal year was more than $600 million below what was estimated amid a worsening economic crisis that has spooked U.S. investors. Treasury Secretary Juan Zaragoza said the government collected nearly $9 billion for fiscal 2014-2015, a $76 million drop compared with the previous year. "It's a reflection of the difficult fiscal and economic situation the island faces," he said in a statement, adding that it directly impacts the government's liquidity. Zaragoza blamed the drop on a variety of economic issues, including the elimination of a gross receipts tax in 2014. He said his department will take several measures to boost revenue collection, including stepping up the fight against widespread tax evasion. The general fund now faces a more than $700 million deficit as Puerto Rico enters its ninth year in recession. The fund provides financial backing for general oblig

Can Puerto Rico Utility Avoid Debt Restructuring?

 Puerto Rico’s tourism industry has fallen victim to the island’s struggling economy, hit by one misfortune after another. In March, the San Juan Beach Hotel filed for bankruptcy. This week, the Condado Plaza Hilton was forced to close its casino. But nearly two thousand miles away, some Wall Street firms see an opportunity in the turmoil. On Thursday, the island received a lift from one of its biggest cheerleaders, John A. Paulson, the billionaire hedge fund manager, who is investing $20 million for the San Juan Beach Hotel. This week, Fundamental Advisors, another Wall Street investment firm, bought the iconic El San Juan Resort and Casino for $71 million from Blackstone. Paulson & Company, Mr. Paulson’s $20 billion hedge fund, has agreed to renovate the San Juan Beach Hotel and turn it into an “ultraluxury boutique hotel” over the next few months, the Puerto Rico Department of Commerce and Economic Development said. Fundamental, a $2 billion firm that specializes in buying d