The largest public corporation, power utility PREPA, has around $9 billion in debt and is now negotiating a restructuring with its creditors.
Puerto Rico’s Public Finance Corp. failed to transfer funds to pay the principal and interest on its bonds, according to a filing Wednesday, highlighting the cash problems the US territory is experiencing as it tries to restructure $72 billion in debt.
The lack of American assistance makes it more and more likely that Puerto Rico’s bondholders, which include Franklin Templeton and OppenheimerFunds, who together hold about $5 billion of the island’s debt, are going to have to take a steep haircut on what they’re owed. Puerto Rico’s public entities now cannot make use of Chapter 9 bankruptcy laws as entities in USA states can and instead have to renegotiate their debts with creditors.
Senators Richard Blumenthal and Charles Schumer introduced the bill along with 10 other senators. “The litigation costs alone would be substantial”.
So far, both the White House and Congress have refused to provide assistance, and the global Monetary Fund can’t help because Puerto Rico isn’t a country. The island’s bonds are popular with money market fund managers because they’re free from federal tax.
The Senate bill, whose lead cosponsors are Sen. The bill is identical to one introduced in the House earlier this year by Puerto Rico’s resident commissioner Pedro Pierluisi. Schumer said they have talked to a number of Republican colleagues, including Sen.
At this point, the Blumenthal-Schumer bill has only Democratic sponsors.
“Time is not on our side”, said Blumenthal. Marco Rubio (Fla.).
After the bill’s release, a Treasury Department spokesman said the administration was “very pleased” about the proposal.
“What we are proposing is that those public corporations and municipalities in Puerto Rico be given the same access to Chapter 9 as any similar entities in the United States”, said Blumenthal at a press conference on Wednesday.
“The owner and developer of the Trump global Golf Club in Puerto Rico has, for many months, been in default of its obligations to Trump due to their company’s financial constraints and a hard business climate in Puerto Rico”, said Donald’s son Eric, a Vice President at The Trump Organization, in a statement.