Make no mistake about it: Puerto Rico will default in May on some of the $470 million it owes, according to Moody’s Investors Service.
The cash-strapped commonwealth is expected to fall short of paying $422 million to holders of bonds from the Government Development Bank, the credit rater said Friday in a report. It may also default on debt from the Employees Retirement System, Industrial Development Co. and Highways and Transportation Authority because the GDB has just $562 million in liquidity as of April 1, Moody’s said.
“These impending defaults would follow the government’s efforts to emphasize its severe cash depletion during the past year,” Moody’s analysts led by Ted Hampton and Emily Raimes wrote. “Even if federal oversight legislation is passed by the end of next week, Puerto Rico will still default because the commonwealth treasury and the GDB, which has long been the government’s fiscal agent, have insufficient liquidity for upcoming debt payments.”
Moody’s expects Puerto Rico to pay the less than $3 million owed to holders of general-obligation bonds and securities guaranteed by the commonwealth’s constitution to “avoid the almost certain litigation that would quickly follow.” Sales-tax backed debt, known by the Spanish acronym Cofina, will pay with funds already deposited with the trustee.
Appropriation debt from the Public Finance Corp., which accounts for 75 percent of all Puerto Rico defaults so far, will fail to pay yet again, Moody’s said.
Senator Schumer asked unanimous consent that the Senate take up and pass S.1774 , Puerto Rico Chapter 9 Uniformity Act of 2015. Senator Hatch objected. Unofficial Transcript : SCHUMER: I AM GOING TO ASK FOR A UNANIMOUS CONSENT REQUEST BUT SPEAK FOR A COUPLE OF MINUTES AND ENGAGE IN SOME DISCUSSION WITH MY DEER FRIEND, THE SENIOR — MY DEAR FRIEND, THE SENIOR SENATOR FROM THE STATE OF UTAH. I WANT TO THAIPG HIM FOR COMING TO THE FLOOR TODAY ON THIS ISSUE. I’M — ON PUERTO RICO. I AM HEARTENED HE HAS EXPRESSED INTEREST IN WORKING WITH US TO GET DOES ON TO HELP OUR FELLOW CITIZENS IN PUERTO RICO. I ALSO WANT TO THANK MY FRIENDS, THE SENATORS FROM CONNECTICUT, NEW JERSEY, OREGON, WASHINGTON, ILLINOIS, AND MY COLLEAGUE FROM NEW YORK WHO IS HERE FOR THEIR STEADFAST SUPPORT FOR HELPING PUERTO RICO IN THIS TIME OF CRISIS. I RISE TODAY DEEPLY TROUBLED BY THE DIRE ECONOMIC, FINANCIAL, AND HEALTH CARE SITUATION IN PUERTO RICO. THE ISLAND IS FACING A FINANCIAL CRISIS, A HEALTH CARE ...
Puerto Rico’s debt exchange isn’t the only security swap for investors burned by the island’s financial collapse. Franklin Resources Inc. plans to close the $147 million Double Tax-Free Income Fund, whose strategy of plowing more of its assets into Puerto Rico than any other municipal-bond fund turned it into one of the worst performers. After the fund shriveled when investors pulled out money, Franklin is asking those remaining to exchange their shares for a piece of the $8.3 billion High Yield Tax-Free Income Fund, which has far less exposure to the island. “It parallels the life cycle of Puerto Rico in the debt markets,” said Matt Fabian, a partner at Municipal Market Analytics, a research firm based in Concord, Massachusetts. “As the island becomes increasingly insolvent, investing strategies dependent on the island also become insolvent.” U.S. mutual funds for years were eager buyers of the Caribbean territory’s debt, which is tax-exempt everywhere in the nation and provided ...
Treasury Secretary Jack Lew recently visited Puerto Rico in an effort to show the administration’s support for the beleaguered territory. Lew’s comments on his trip to San Juan and his January 15 letter to House Speaker Paul Ryan (R-Wis.) make it clear that when it comes to Puerto Rico, the administration largely equates “support” with “bankruptcy.” The administration’s well-intentioned desire to help the people of Puerto Rico is laudable, but it is a mistake to give Puerto Rico the power to rewrite its laws and contracts through a retroactive application of new bankruptcy laws. The administration’s position is neither good policy for Puerto Rico nor the United States. Ambac is one of the country’s largest guarantors of municipal and state debt. In Puerto Rico, we insure well over $2 billion of the Commonwealth’s various debt obligations, and our commitments to the island extend until the year 2054. Our financial support of the Commonwealth helped build i...
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