Legislation to help Puerto Rico restructure its $72 billion in debt was introduced in the House of Representatives yesterday, as members sought to address the island’s financial crisis quickly without setting a precedent that troubled states might try to follow, the New York Times reported today.
Puerto Rico in Distress
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Puerto Rico proposed a new plan yesterday to restructure its debt, offering some creditors better terms than an earlier plan but falling well short of winning broad support, the New York Times DealBook blog reported.
A recent American Enterprise Institute commentary said that a cramdown process will penalize those not responsible for the fiscal problems confronting Puerto Rico, weaken commonwealth incentives to adopt fiscal and governance reforms and increase future borrowing costs for the island and for the overall municipal bond market.
Puerto Rico Governor Alejandro Garcia Padilla’s declaration of a state of emergency at the Government Development Bank to halt the erosion of the bank’s dwindling cash by allowing withdrawals only to fund health, public safety and education services is raising the risk for creditors as the island heads toward default, Bloomberg News reported today.