Millions of Puerto Ricans here and on the island were disappointed when Congress approved a federal budget without bankruptcy relief for Puerto Rico to help manage over $70 billion in debt, leaving the island in limbo about what to do next.
Looks like it won’t be until March until Congress takes another look at the island’s fiscal crisis, according to reports. Meanwhile, Puerto Rico has $1 billion in debt payments due in January, just a few weeks away. It’s unclear what it will do now but my best guess is the island will make some kind of payment but it would still be in default for not making an entire payment.
The Puerto Rico government is in talks this week with bondholders of its electric power authority debt as well as its infrastructure debt, totaling more than $50 billion. However, Puerto Rico has been considerably weakened without any negotiating tools at its disposal.
It’s unseemly to watch and read how hedge funds – latecomers to buying the island’s triple tax exemption debt at bargain rates and who now own 30 percent of it – are forcing huge operating cuts on an island already mired in a nearly 10-year recession.
But it’s also maddening how island officials earlier this year sold $3 billion of bonds to these same hedge funds to raise desperately needed operating cash. In doing so, it sold the island’s soul to third parties notorious for brass knuckle tactics.
Florida Sen. Marco Rubio has played a shameful role in this unfolding debacle. Rubio was once for allowing Puerto Rico to have access to Chapter 9 bankruptcy protection but is now against it, stating bankruptcy ought to be a last resort. The senator changed his mind after a certain hedge fund held a fund-raiser for his presidential campaign this summer, state news reports.
Is Rubio for or against?
It is not the first time Rubio has gone against his Puerto Rican constituents, which are now the second most powerful Hispanic group in Florida, behind Cubans in both population and voting. Rubio was against the U.S. Supreme Court confirmation of Sonia Sotomayor, a New York-born Puerto Rican who is revered by the community. He voted twice against Maricarmen Aponte as U.S. ambassador to El Salvador (on the floor and once in committee) before making an about face. Aponte also happens to be Puerto Rican.
Puerto Rican voters are keeping a close eye on Rubio. Local activist groups have picketed Rubio’s Orlando office to pressure the senator to push for the bankruptcy provision in the federal budget, to no avail.
Now Puerto Rico faces withering negotiations with hedge funds, most of which have unreasonable demands for deep, deep operating cuts to the island’s administration in order to generate cash for debt payments. They are feeding off the carcass of an island where over 40 percent of people are already poor by federal standards.
˜˜María Padilla, Editor
Who Bought Puerto Rico Bonds?
• Franklin Templeton
• Oppenheimer Funds
• D.E. Shaw Group
• Angelo Gordon
• BlueMountain Capital
Source: NY Times