TRIBUTE TO A PRESIDENT
TRIBUTE TO A
Thursday, May 4, 2017
Puerto Rico Declares a Form of Bankruptcy
With its creditors at its heels and its coffers depleted, Puerto Rico sought what is essentially bankruptcy relief in federal court on Wednesday, the first time in history that an American state or territory had taken the extraordinary measure.
The action sent Puerto Rico, whose approximately $123 billion in debt and pension obligations far exceeds the $18 billion bankruptcy filed by Detroit in 2013, to uncharted ground.
While the court proceedings could eventually make the island solvent for the first time in decades, the more immediate repercussions will likely be grim: Government workers will forgo pension money, public health and infrastructure projects will go wanting, and the “brain drain” the island has been suffering as professionals move to the mainland could intensify.
Puerto Rico is “unable to provide its citizens effective services” because of the crushing weight of its debt, according to a filing on Wednesday by the federal board that has supervised the island’s financial affairs since last year.
While many of Puerto Rico’s circumstances are unique, its case is also a warning sign for many American states and municipalities — such as Illinois and Philadelphia — that are facing some of the same strains, including rising pension costs, crumbling infrastructure, departing taxpayers and credit downgrades that make it more expensive to raise money. Historically, Puerto Rico was barred from declaring bankruptcy. In the end, however, financial reality trumped the statutes, and Congress enacted a law last year allowing bankruptcy-like proceedings.
Puerto Rico has been in a painful recession since 2006, and previous governments dug it deeper into debt by borrowing to pay operating expenses, year after year. For the last two years, officials have been seeking assistance from Washington, testifying before stern congressional committees and even making fast-track oral arguments before the United States Supreme Court.
At the same time, Puerto Rico’s efforts to coax its creditors to agree to concessions have gone nowhere. Now the coming court proceedings will give Puerto Rico extraordinary powers to impose losses on holdout creditors unilaterally.
The island’s many creditors — whose lawsuits filed against Puerto Rico on Tuesday prompted the island’s request for court relief on Wednesday — are likely to receive far less of their money back than they want. Their predicament may turn out to be a cautionary tale for bond holders of other troubled states and cities. Puerto Rico’s case could show public workers and retirees that seemingly inviolate pension systems can be changed, too.
The next step is for the Supreme Court — specifically, Chief Justice John G. Roberts Jr. — to designate a bankruptcy judge to handle the case.
The island’s lawyers may view some bankruptcy courts as more likely to be favorable to them than others. Some creditors fear Puerto Rico will seek to have the case handled in the Southern District of New York.
Puerto Rico’s governor, Ricardo Rosselló, issued a statement Wednesday aiming to offer some reassurance, even as he sought the federal court’s protection. “We remain committed to holding good-faith negotiations to reach agreements with our creditors,” he said, adding that he hoped the court proceedings would “accelerate the process.” He appeared to be referring to the extraordinary power Puerto Rico will now have in court to unilaterally impose big losses on creditors.
Some of those creditors are furious.
“The Commonwealth’s proposal is not a credible starting point for negotiations,” Andrew Rosenberg of Paul, Weiss, Rifkind, Wharton and Garrison, an adviser to the Ad Hoc Group of Puerto Rico General Obligation Bondholders, said in a statement. He said that moving the proceedings to bankruptcy court would put the situation in “free-fall.”
The creditors got a shock this year when Mr. Rosselló issued a five-year fiscal plan that allowed only about $800 million a year to pay principal and interest on Puerto Rico’s bond debt, far less than the roughly $3.5 billion a year it would cost to make those payments on time. The prospect of losses on that scale prompted some creditors to argue that most of the $800 million was rightfully theirs.
“That things are starting out in such a highly adversarial way strongly suggests this will be a long and contentious journey for Puerto Rico,” said Matt Fabian, a partner at Municipal Market Analytics who closely tracks activity in the municipal bond market.
Puerto Rico’s case will be the first ever heard under a federal law for insolvent territories, called Promesa, which was enacted last summer; the Obama administration had warned that a “humanitarian crisis” would ensue if Puerto Rico were not given extraordinary powers to abrogate debt. There is no existing body of court precedent for Promesa, but the island’s creditors — who range from hedge fund managers to mom-and-pop investors — are bracing for a titanic battle.
Despite the depth of the island’s troubles, many Republicans in Congress have opposed debt relief, saying that the island has long received big federal subsidies for its health system, public housing and other works. They said Puerto Rico should explain what it had done with that money before it got any more help.
Last week President Trump suddenly added fuel to those fires, saying on Twitter that there should be no “bailout” for Puerto Rico.
On the island, Washington is not seen as a helper but as an unsympathetic colonial overlord. The step toward bankruptcy-like proceedings, under a federal judge, intensified complaints that Puerto Rico has lost all control of its own future.
But at the same time, some Puerto Ricans say quietly that if the court proceedings really do allow their government to cancel debt, their island may finally get the fresh start it needs.
The coming court proceedings will not be formally called a bankruptcy, since Puerto Rico remains legally barred from using Chapter 9, the bankruptcy route normally taken by insolvent local governments. Instead, Mr. Rosselló petitioned for relief under Title III of the Promesa law, which contains certain Chapter 9 bankruptcy provisions but also recognizes that, unlike the cities and counties that use Chapter 9, Puerto Rico is not part of any state and must in some ways be treated as a sovereign.
Bankruptcy lawyers and public finance experts are watching Puerto Rico’s case closely, to see if it shows a path that financially distressed states like Illinois might also one day take. States, like United States territories, currently cannot declare bankruptcy.
The only creditors who reached an agreement with Puerto Rico were the holders of a class of bonds, about $9 billion worth, that were sold to raise money for the island’s public power utility. Those creditors gave concessions that the governor pointed to Wednesday as a good example for other creditors to follow.
The governor’s fiscal plan also calls for shifting all current government workers from pensions into 401(k)-style retirement plans. Current retirees will continue to receive their traditional monthly pensions, but the amounts are to be reduced by about 10 percent on average.
The governor’s hand was forced by the expiration on Monday, at midnight, of a court stay that had been keeping Puerto Rico’s creditors from suing. On Tuesday, as soon as the stay expired, bondholder groups and at least one bond insurer sued. Wednesday’s actions by the governor and the federal supervisory board effectively blocked the lawsuits from proceeding.
Correction: May 3, 2017
An earlier version of this article misstated the annual cost of fully servicing Puerto Rico’s $73 billion in bond debt. It would be about $3.5 billion, not $3.5 million.
2015 President - EN from Roberto Petitpas on Vimeo.
2015 President - PT from Roberto Petitpas on Vimeo.
VS + VP ENG-RO PT FR
21st Century Wire A BRAMERTON A. Orlov Abayomi Azikiwe ABIZAID ABOGADOS ABOGADOS PROGRESISTAS DE ESPAÑA Acción secreta activism Ajamu Baraka AL-ASSAD AL-HUSAINI Aleksandar PAVIC alex gorka Alex Lantier Alexander Azadgan ALEXANDER DUGIN ALEXANDER KUZNETSOV Alexandra Bruce Alexandre Artamonov Alexandre Cazes ALEXIS Ambrose Evans-Pritchard an Greenhalgh Ana de Sousa Dias ANA SOUSA DIAS ANASTASOV Anatol Lieven Andre Vltchek ANDREI AKULOV Andrew Griffin Andrew Korybko Andrew P. Napolitano Andrey Afanasyev animals Ann Diener Ann Wright Anna Hunt Anna Von Reitz Anne Speckhard Ph. D. Anne Speckhard PH. D Anti-Media News Desk Antony C. Black aRABIC ARAM MIRZAEI Ariel Noyola Rodríguez Asaf Durakovic Asma Assad ASMOLOV ASSANGE Avelino Rodrigues AVNERY BAKER bankers BAOFU Barrett Brown Bashar al-Assad Baxter Dmitry BECKER Before it's News BEGLEY BERGER BILL SARDI Binoy Kampmark BOGDANOV Brazilian BRENNAN BRIAN CLOUGHLEY BULGARIAN BUTLER By Jack Heart & Orage CABRAS Captagon Carey Wedler CAROL ADL CARTALUCCI Catherine Austin Fitts CATHY O'BRIEN cats Chelsea Manning Choice and Truth Chossudovsky Chris Cole CHRIS HEDGES Christopher Black CIA Claire Bernish clinton Collective Evolution Comunidad Saker Latinoamérica COOK Covert Action Craig McKee CUNNINGHAM CURENT CONCERNS CURRENT CONCERNS Daniel Lazare Daniel McCARTHY Daniele Ganser DANSK Darius Shahtahmasebi DARK JOURNALIST DARK JOURNALISTt DAVID HOROVITZ David Lemire David STERN David Swanson DEAN Deena Stryker Denali Deutsch DINNUCI DIPLOMACY Dmisa Malaroat DMITRIY SEDOV Dmitry Minin Domenico Losurdo Donald Trump doni DONINEWS Dr. Kevin Barrett DUFF DUGIN EDITOR'S CHOICE EDWARD SNOWDEN Eliason ELISABETE LUIS FIALHO Eliseo Bertolasi EMMONS endgahl ENGDAHL Eric S. Margolis Eric Zuesse ESCOBAR EUROPE Evan at Fight for the Future F. William Engdahl FANG Farage farewell address FEDERICO PIERACCINI FERRIS Field McConnell finance Finian Cunningham FORBIDDEN KNOWLEDGE TV forbidden nowledge Foster Gamble four horsemen Fr. Andrew Phillips FRANCESCA CHAMBERS Francesco Colafemmina Freeman FRENCH FRISK FULFORD Fuller G20 G20 SUMMIT GALLAGHER Gareth Porter GARY NORTH General Flynn George Gallanis GERMAN GERMANOS Gilad Atzmon Gilbert Doctorow Glenn Greenwald GLOBAL RESEARCH global warming GORDON GORDON DUFF Graham E. Fuller Graham Vanbergen GREENHALGH GREENWALD Greg Hunter Gregory Copley GRETE MAUTNER GUEST CONTRIBUTORS GUNNAR GUTERRES HAGOPIAN Hakan Karakurt Herbert McMaster HERMAN HERNÂNI CARVALHO hill HILLARY CLINTON hollywood http://www.independent.co.uk/ http://www.northcrane.com/ http://www.salem-news.com/ http://yournewswire.com/ HUDON HUDSON ideeCondividi INAUGURATION INCÊNDIOS Inform Clear House Internet IODINE Isaac Davis ITULAIN Ivan Blot JALIFE-RAHME JAMES James Comey JAMES CORBETT JAMES GEORGE JATRAS James ONeil JAMES PETRAS Jane Grey Jay Greenberg Jean Perier Jean Périer Jean-Claude Paye JEFFREY SMITH JEZEBEL JILL STEIN Jim W. Dean Joachim Hagopian john McCain JOHN PILGER John Podesta John W. Whitehead JONAS E. ALEXIS Jonathan Marshall JONES Joseph Thomas JULIAN ASSANGE KADI Kadir A. Mohmand Kadyrov kalee brown Karen Kwiatkowski Karine Bechet-Golovko KATEHON KATHEON Katherine Frisk Ken O’Keefe Kenneth P. VOGEL KERRY BOLTON Kerry Cassidy Kerry Picket Kevin Barret. VT Kim Petersen KIMBERLEY KINZER KIRYANOV KOENIG Konstantin Asmolov KORYBKO KORZUN Krum Velkov Larry Chin Laurent Gerra lavr LAVROV LE PARISIEN Le Saker Francophone LENDMAN Lionel Shriver LOFGREN LVOV MACMILLAN macron Makia Freeman Manlio Dinucci Manlio Dinucci - Manuel Ochsenreiter Marco Cassiano MARCUS WEISGERBER MARGARET KIMBERLEY MARIA ZAKHAROVA Mark Citadel Mark Taliano Markus Frohnmaier Martin Berger Martin Hurkes MARUSEK Matt Peppe MATTEO rRENZI MATTHEW COLE MATTHEW JAMISON MCLAUGHLIN MÉLENCHON MELKULANGARA BHADRAKUMAR MERCOURIS MEYSSAN MICHAEL AVERKO Michael Brenner Michael Hudson MICHAEL JABARA CARLEY Michael S. Rozeff Michael T. Klare Middle East MIG video mike harris Mike Whitney MINA Mint Press News MintPressNews MIRANDA Misión Verdad MKULTRA Mohamed Mokhtar Qandiel MOHMAND Montenegro MOON OF ALABAMA moonofalabama MOST DAMAGING WIKILEAKS NATO NEO NEWS DESK Nicholas Nicholaides Nick Turse NIKANDROV Nile Bowie NISSANI NORMAN SOLOMON NOVOROSSIA novorussia NYTIMES obama obamas Oliver Stone Olivier Renault ONU ORLOV OSCAR FORTIN PALESTINE PARRY Patrick Iber Patrick J. Buchanan Patrick Martin PAUL CRAIG ROBERTS Paul Fitzgerald Paul R. PILLAR Paul Street PAYE PCR Pedro Bustamante pedrógão grande PEPE ESCOBAR Peter Dale Scot Peter Dale Scott Peter Koenig PETER KORZUN PETRAS Ph.D Phil Butler PICCARD Pierre Farge PILGER PISKORSKI PODESTA Pope Francis PORTUGUESE PRAVDA prc PRESTON JAMES Prof Michel Chossudovsky Prof Rodrigue Tremblay Project Veritas PUTIN PUTIN/TRUMP Putin/Trump meeting PYOTR ISKENDEROV Queen Elizabeth Rajan Menon Raphaël Meyssan rebecca gordon Redmayne-Titley RELAX réseau Réseau International Réseau Voltaire Réseau Voltaire: Revue Défense Nationale Ricardo Vaz RICHARD DOLAN Richard Galustian Richard Labévière Richard Spencer Rick Sterling Rob Urie Robert Bridge Robert F. Kennedy Jr Robert J. Burrowes Robert J. O’Dowd Robert O’Dowd ROBERT PARRY robert steele ROBERTS rof. Mohssen Massarrat ROLAND Roland San Juan blog ROMANIA PROTESTS ROMANIAN Ron Aledo RON PAUL Ron Paul Institute RT Rudolph Giuliani RUDY GIULIANI RUSSIA TODAY RUSSIAN Russian Insider Russie politics Russka RUSSOPHILE Ryan Dawson Ryan Gallagher Salman Rafi Sheikh sana sanders SANTOS SILVA SCAHILL SCOTT Scott Humor Sean Adl-Tabatabai SERGEY LAVROV sessions Seth Ferris SHAKDAM Shawn Hamilton SHEIKH sic notícias SIMON PARKES Smith & Wesson SNOWDEN SNYDER Sophie & Co Soros SOUTH FRONT SOUTHFRONT SPANISH speech GERMAN MP Speer-Williams Sputinik sPUTNICK SPUTNIK STACHNIO State of the Nation STEPHEN KARGANOVIC Stephen Kinzer Stephen Lendman Steve Pieczenik STEVE PIECZENIK: Steven MacMillan STONE STORM CLOUDS GATHERING StormCloudsGathering.com Strategic Culture STRATTON STRYKER Sunagawa Syria TAKEHON TALIANO TASS TEREHOV The Anti-Media The Duran THE INTERCEPT THE SAKER the true activist THERAPEOFJUSTICE Thierry Meyssan Third Presidential Debate Tillerson tom dispatch TOM ELEY Tom Engelhardt Tom Feeley TOM JOAD TomDispatch TOMGRAM Tony Cartalucci True Activist TrueActivist.com trump TSUKANOVA TTIP TURKEY TYLER DURDEN Udo Ulfkotte Ukrainian Deserter USA ELECTION USA ELECTIONS Valentin Vasilescu Van AUKEN Vanessa Beeley VASILESCU Vault 7 Veteran Intelligence Professionals for Sanity VETERANS TODAY VETERNAS TODAY Victory Day video videos VIETNAM VETERANS Viktor Mikhin VITALY CHURKIN Vladimir Chizhov Vladimir Safronkov Vladimir Terehov VLTCHEK VT Waking Times WANTA Washingtons blog WAYNE MADSEN WESTBERG Westmoreland WHITEHEAD Whitney Webb WIKILEAKS Wikispooks William Blum WOODS world cup 2018 Xi Jinping Yameen Khan Yanis Varoufakis YEMEN Youssef A. Khaddour ZAKHAROVA ZÉ GERALDO ZEROHEDGE ZUESSE