Puerto Rico asking bondholders to accept payment moratorium, restructuring of …

30 Jun 2015 | Author: | No comments yet »

Puerto Rico Governor Calls for Delay in Debt Payments for ‘Number of Years’.

U.S. stocks tanked on Monday with the Dow giving up all its gains for the year as Greece headed toward default and possible exit from the eurozone common currency union. Puerto Rico is “insolvent” and will soon run out of cash, according to a newly appointed adviser to the commonwealth who was the judge who oversaw the historic bankruptcy of Detroit.SAN JUAN, Puerto Rico — Puerto Rico’s governor said Monday night that he will form a financial team to negotiate with bondholders on delaying debt payments and then restructuring $72 billion in public debt he says the US island can’t repay. The Dow Jones Industrial Average dropped 350.33 points, or close to 2 percent, while the Standard & Poor’s 500 and the Nasdaq each also lost around 2 percent as Greece kept its banks shuttered, fearing a run on cash, and prepared to default on its debt on Tuesday. The U.S. territory’s future hinges on gaining eligibility for debt restructuring under the U.S. bankruptcy code, a process it does not currently have access to, said Steven Rhodes, who retired as a U.S.

Governor Alejandro Garcia Padilla made the announcement just hours after international economists released a gloomy report on Puerto Rico’s economy — another jolt to the recession-gripped island as well as to a world financial system that’s trying to avoid a collapse in Greece’s finances. ‘‘Even if we increase revenues and cut costs, the magnitude of the problem is such that we would not resolve anything given the weight of the debt we’re dragging,’’ he said. ‘‘The only way we’ll get out of this hole is to join forces and agree, including bondholders, to assume some of the sacrifices.’’ The team has until Aug. 30 to develop a plan, which would require legislative approval to take effect. Asked about the stock market decline and Greece on Monday, White House press secretary Josh Earnest basically shrugged it off. “The fact is the U.S. exposure to Greece is small, in terms of our direct exposure,” he said. “We do continue to urge all sides to contribute to pragmatic discussions.” Earnest said President Barack Obama spoke with German Chancellor Angela Merkel over the weekend and discussed Greece with French President Francois Hollande on Monday. Legislators are currently debating a $9.8 billion government budget that calls for $674 million in cuts and sets aside $1.5 billion to help pay down the debt. Alejandro García Padilla, who took office two years ago, told Puerto Ricans during a televised address Monday that his government’s attempts to slash expenditures and restructure its debt have failed.

But he didn’t say whether Obama strongly urged either leader to extend Greece’s bailout immediately and without condition in order to calm the selling in global markets. Garcia said urgent action is needed. ‘‘The inherited debt is so big that it bars us from accessing the financial markets and our economy does not generate enough revenue to repay our obligations,’’ he said. Without such a plan, “the option is unplanned and unilateral default of our obligations, with all the negative consequences that this implies for each and every one of us,” he said. Gary Okabayashi, left, and his partner of 32 years Lenny Zimmerman, both of Waikiki, Hawaii wave to morning rush hour traffic showing their support for Hawaii’s same-sex civil unions bill civil at the Hawaii State Capitol building in Honolulu on Tuesday, July 6, 2010. A small concert hall, music studios and an exterior music facility for the Steinway Society of Massachusetts, a Celebrity Series of Boston performance venue, and exhibition space, a reference library and auditorium for the Society of Arts and Crafts are the finalist proposals for civic and cultural space in the new 100 Pier 4 apartment tower in the South Boston Seaport District.

Anne Krueger, a former World Bank chief economist who worked on the report commissioned by Garcia’s administration, presented the findings ahead of Garcia’s address. ‘‘The situation is dire, and I mean really dire,’’ she said. A key point in the proposal is to get permission for Puerto Rico to go through bankruptcy as Detroit did in 2013, something that current law prohibits. “It is time for us to ask for concerted actions from Washington, in one voice, now.

Building owner UDR Inc. and the Boston Redevelopment Authority narrowed the field from five organizations who were vying to program the 20,000 square feet of indoor and outdoor space and a sixth organization looking to partner with the selected tenant. Puerto Rico’s bonds were popular with US mutual funds because they are triple-tax exempt, but hedge funds and distressed-debt buyers began stepping in to buy up debt as the island’s economy worsened and its credit rating dropped.

Padilla said. “We cannot allow the situation to force us to choose between paying our creditors and paying our policemen, teachers and nurses.” He also called for lawmakers in Washington to allow Puerto Rico’s municipal entities access to the protections afforded under chapter 9 of the bankruptcy code. Action wherein changes can finally be made to Chapter 9, so that Puerto Rico can count on the same protections as other jurisdictions,” García Padilla said.

Morningstar, an investment research firm based in Chicago, estimated in 2013 that 180 mutual funds in the United States and elsewhere have at least 5% of their portfolios in Puerto Rican bonds. L ProEx, a physical therapist owned private practice specializing in orthopedics, spine and sports medicine, announced that Nicole McManus, left, has been promoted to assistant director of clinical education. Sergio Marxuach, of the Center for the New Economy, drew parallels between Greece and Puerto Rico. ‘‘The lack of transparency of public finances, the bad quality of statistics, the massive tax evasion, the government corruption . . . it’s the same in Greece like in Puerto Rico,’’ he said.

Puerto Rico, like U.S. states, can’t file for chapter 9 bankruptcy protection, which is an option for cities and towns and any subdivision, agency or “instrumentality” of a state. A report released Monday by Krueger and others said Puerto Rico’s public debt is larger than originally thought and urged the government to act quickly. ‘‘This is a daunting agenda politically, legally and organizationally. The White House has mostly taken a hands-off approach to Greece, partly because he has been occupied by other matters, from the shootings in Charleston, South Carolina, to the Supreme Court’s decisions on Obamacare, gay marriage and other issues. It is also an urgent one: The government’s cash balances can evaporate in the face of delays, reducing the room for maneuver and intensifying the crisis,’’ the report said.

We have done all that was within our power, but, as the report makes clear, the next step must be to ensure more favorable terms for the repayment of our debt.” In a related development, Fitch Ratings cut Puerto Rico’s general-obligation debt rating further into speculative or “junk” territory earlier Monday, to CC from B, warning of possible future downgrades.

Combined with thousands of Puerto Ricans leaving the island for the U.S. mainland every year and a constantly sputtering economy, credit agencies lowered Puerto Rico’s bond rating to near-junk status and warned of a full fiscal collapse. Some outside observers suggest that Obama should be putting more pressure on Merkel to ease terms on Greece and at least grant it a lifeline to keep its banks open ahead of the referendum next month. During his address Monday, Padilla said it was now up to Puerto Ricans, and the island’s creditors, to assume “shared sacrifices” to get the island on firm legal ground. “Yes, it is time that those who lent to us also come to the table of sacrifices, at which we are already seated, so that later we can all together share the fruits of that sacrifice,” he said. And many large investors on Monday sided with the White House’s hands-off approach, saying any attempts to intervene would likely prove futile, possibly worsening the market sell-off by making the world’s largest economy seem powerless. “There is very little the administration can do other than be seen to urge Greece and its creditors to resume a constructive dialogue,” said Mohamed El-Erian, chief economic adviser at Allianz. “It is not in a position to intervene directly, especially financially.

And operating through the IMF is less effective when the institution itself is formally part of a European creditor grouping, as is the case in Greece.” The numbers largely back up this belief. And European growth is improving, putting other countries less at risk of following Greece out of the common currency zone. “We were ripe for a correction, so this may be the catalyst. Combine Puerto Rico with Greece and we get a double,” said David Kotok of Cumberland Advisors. “But each of them is contained and limited.” Some analysts on Monday said the U.S. might have a bigger problem with Puerto Rico than Greece.

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