Some of Puerto Rico’s most influential creditors are for the first time signaling support for the broad outline of a government proposal to overhaul the island’s crushing debts.
The San Juan government, squeezed by $72 billion in debt and a stagnant local economy, has been weighing whether to keep paying bondholders or defaulting, a move that could trigger dozens of lawsuits by creditors and drag out Puerto Rico’s fiscal problems for years. A $354 million payment is due on Dec. 1.
Seeking to avoid protracted legal skirmishes, Puerto Rico officials have been trying to engage various creditors in deals that would avert default.
In meetings with advisers to creditor groups on Friday, the government’s chief adviser, Jim Millstein, presented a proposal to exchange the island’s existing bonds for new debt that would be less burdensome to Puerto Rico.
The proposal — at least in theory — was met favorably by holders of billions of dollars of general obligation bonds, according to people with direct knowledge of the group’s position who were not authorized to speak publicly. However, the government still needs to win over many other creditors, making a deal far from certain.
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Jim Millstein, the government’s chief adviser, presented a proposal to creditors.Credit Ann Heisenfelt/Getty Images
General obligation bonds carry a guarantee in the Puerto Rico constitution stipulating that debt must be repaid before just about any other expense. Given that guarantee, general obligation holders have been expected to be among the creditors least likely to agree to a restructuring that might reduce the value of their bonds.
But over the weekend, a group of about half a dozen hedge funds and other investment firms that own general obligation bonds signaled support for the concept of the government’s debt exchange, these people said. Among that group are Monarch Alternative Capital, Fundamental Credit Opportunities and Autonomy Capital.
Leading up to Friday’s meeting, hedge fund managers had complained privately that Puerto Rico officials have been talking tough about a possible default, while not doing enough to cut government spending.
One of the people briefed on the hedge funds’ position said the group collectively felt the proposed debt exchange was a “a constructive first step toward forging a solution.” This person said that the two sides had not started to discuss many of the financial details of the exchange.
But broadly speaking, the exchange would involve rolling up most of the island’s current debt and restructuring it into a new “superbond,” according to people briefed on the plan. As part of that new bond, general obligation holders would have the first claim on government revenues, giving them the highest priority in the superbond structure. Holders of other forms of the government’s debt would have lower priority. It is not clear whether bondholders, in return, would be asked to buy into the superbond at a discount, rendering their investments less valuable than their current holdings.
The thaw in the hedge funds’ position is likely to play out in Washington, where lawmakers have been debating whether to extend bankruptcy authority to Puerto Rico.
The commonwealth does not have access to the federal bankruptcy courts to restructure its debts, forcing the government and creditors to work out a deal outside court.
Republican leaders in Congress have expressed reservations about giving Puerto Rico or its public entities access to Chapter 9 bankruptcy protections, while some Democrats have publicly supported the idea, with Obama administration officials warning that the island faces a “humanitarian crisis” in the coming months.
The person briefed on the hedge funds’ position said that leaders of both parties in Washington should take note of Friday’s discussions as the start of a “private sector solution” to the debt crisis. The hedge funds hope that Washington will avoid taking any measures that might undermine that process.
For months, Puerto Rico has failed to persuade Congress to pass legislation that would give the island’s public corporations, like its sewer and water authorities, access to Chapter 9 bankruptcy. Some officials have said that would address only a portion of the debt problems, though.
There are currently discussions in Washington about whether a bankruptcy measure for Puerto Rico could be included as an amendment to the final federal budget.
A crucial test comes on Dec. 1, when the island’s Government Development Bank must make the $354 million debt payment. This month, analysts at Moody’s Investors Service predicted that the government would skip some of those payments because of the worsening liquidity situation.
Officials have stayed publicly vague about whether they intend to make the Dec. 1 payment. In an interview last week, Melba Acosta, the president of the Government Development Bank, said the government had yet to make up its mind on whether to make the debt payment next month or another large payment coming due in January.
In some circles, advisers have been pushing for Gov. Alejandro García Padilla to default to force the creditors, including the hedge funds, to the negotiating table.
A default, these people argue, might also prompt Congress to act faster to give Puerto Rico access to Chapter 9 — something many creditors want to avoid.
As the struggling island nation of Puerto Rico grapples with its near $70 billion in debt, with most major investors participating in repayment negotiations, there is one distressed debt hedge fund notably absent from any talks that includes compromise considerations. With each of Puerto Rico’s 3.5 million residents individually representing $2 million each in debt obligations, what happens in Puerto Rico could also have bearing on the future of debt-ridden U.S. jurisdictions as well.
Puerto Rico is one of many U.S.-based governments that has borrowed more money than can logically be repaid
Aurelius Capital Management’s founder of the $4.5 billion distressed debt niche player, is a former bankruptcy lawyer and a Paul Singer protégée. Along with Singer’s Elliott Management, Aurelius engaged in strong arm tactics during its protracted battle with Argentina, claiming the country’s financial leaders engineered “fraud.” Argentina’s leaders were confronted around the world by aggressive debt collectors who used tactics that appeared to generally embarrass or intimidate the target. In fact, it was Brodsky who was reportedly the more aggressive force behind what opponents called the “vulture hedge funds” who purchased debt after repayment negotiations had concluded only to demand payment in full.
Now comes Puerto Rico where Aurelius, working without the involvement of Singer and Elliott Management this time, is reported to own a “big chunk” of Puerto Rico’s $12 billion in general obligation debt. His hedge fund is demanding nothing less than payment in full, which could help his fund’s struggling performance, which is down 3 percent year to date, according to a New York Post report by Michelle Celarier.
Brodsky’s tough stance and the legal battles ahead point to benchmark, a transition point that not only impacts residents of Puerto Rico but residents of any governmental jurisdiction that has taken on unsustainable debt loads, including the United States and its many regional governments. If Brodsky and his apparent “take no prisoners” and “negotiate no settlements” approach wins the day, ultimately a precedent could be set, resulting in taxpayers in any troubled region inside or outside the U.S. ultimately shouldering all of the burden while the hedge funds and institutional investors who made ill-advised lending decisions shoulder no financial responsibility if Aurelius and Brodsky win the day.
Chart via S&P CapIQ
Puerto Rico has looming debt payment it says it cannot make, Moody’s says default likely, Brodsky unmoved
With a looming $267 million interest payment coming due December 1, Puerto Rico says it cannot afford to make the payment and Moody’s Investor Service is saying that a default is likely. As other institutional investors meet with the government to negotiate a compromise where all parties to the bad investment share in the loss, it is Brodsky who is “digging in his heels and refusing to compromise,” a source close to the situation was quoted in the Post as saying.
Aurelius’ hardened, accept no compromise position is credited for the break-up of the so-called Ad Hoc Group of Puerto Rican creditors. The group dismantled after many of institutional players deduced that demanding full payment was going to fail, according to the Post report. “It’s one thing to have a claim, and it’s another thing to expect to get that,” a hedge fund manager was quoted as saying regarding Aurelius’ “take- no-prisoners attitude.”
As a new bankruptcy bill that encourages a negotiated settlement is being considered in Congress, one that hedge fund lobby groups have staunchly opposed, the impact of the decision could be felt in the future by much more than than just the residents of Puerto Rico. With well-known fiscal problems in Detroit, Chicago, California and New York looming, many across the nation might be interested in watching how Puerto Rico plays out.
New York State Empire Development funds will be used to finance a newly-opened Office of Trade and Tourism in San Juan, Puerto Rico, announced Governor Andrew M. Cuomo.
The purpose of the office, which will feature four full-time employees, is to promote tourism from Puerto Rico to New York State and to explore and maximize trade possibilities between the two. As part of the project, a store will feature NY themed and made-in-NY merchandise for sale.
The initial list of items to be featured in the store was chosen by the Taste NY program which is a division of the Department of Agriculture and Markets. Commissioner Richard A. Ball explained how the program will allow NY to “showcase some of our best products from across the state to the world, helping to expand our farmers’ and producers’ reach to new markets.”
The list of vendors to be included was outlined in a press release from the Governor’s office and are the following:
bobbysue’s nuts! (Chappaqua) 2. Brad’s Organic Salsas (Haverstraw) 3. Empire Mayonnaise (Brooklyn) 4. Fly Creek Cider Mill Salsas (Fly Creek) 5. Gatherers Granola (Schenectady) 6. Hurd Orchards Sauces (Holley) 7. JNB Foods (Albany) 8. Joe’s Jerky (Sherrill) 9. Kerber’s Farm Preserves (Huntington) 10. LolaGranola Bar (Croton Falls) 11. Maple Hill Creamery (Stuyvesant) 12. Merle Maple Farm Maple Products (Attica) 13. Mike’s Hot Honey (Brooklyn) 14. Miss Sydney Chutney (Fuero Bush) 15. Nelson Farms – Apple Crisp Mix, Peanut Brittle, Chocolate Maple Topping (Cazenovia) 16. North Fork Potato Chips –Sidor Family Farm (Cutchogue) 17. NYBUZZ Honey (Tivoli) 18. Old School Favorites (Southampton) 19. Roni-Sue’s Chocolates (New York) 20. Saranac Craft Soda (Utica) 21. Saratoga Peanut Butter Company (Saratoga) 22. Saratoga Salsa (Saratoga) 23. Saratoga Spring Water (Saratoga) 24. Serendipitea Teas (Manhasset) 25. Shaver-Hill Maple Farm Maple Products (Harpersfield) 26. Slickepott Caramel Sauce (Delhi) 27. Tom’s Bootleg BBQ Sauce (Albany) 28. Weber’s Mustard Condiments (Buffalo)
As a Jewish insider aside: while State officials think they might be the first to offer the taste of New York in Puerto Rico, Jews in the know are quite aware Chabad of Puerto Rico has been giving the community there quite a taste of New York as evidenced by those boxes upon boxes of Kosher meats, courtesy of Weber Butchers of Boro Park and enjoyed by the Jewish community of San Juan.
A coalition of patients, advocates, and politicians are marching on the cobblestone streets of San Juan today to protest the unequal federal healthcare funding that has left the public healthcare system in ruins. For decades, Puerto Rico has received lower federal reimbursements for Medicaid and Medicare than any of the 50 states despite the fact Puerto Ricans pay the same Medicare rates as citizens in the states. Misssisppi, one of the poorest mainland states, is reimbursed for 80 percent of their costs. But Puerto Rico, despite being immersed in a financial disaster, is only reimbursed for 15 percent of their Medicaid costs.
As a result, Puerto Rico has incurred nearly $20 billion dollars of debt to fund the public healthcare system. The major reason for this is due to the fact that Caribbean island has to rely on a block grant to support its Medicaid program. But with funds expected to run out in 2017, it seems that the healthcare impasse is only going to get worse.
Puerto Rico’s healthcare crisis illustrates how harmful Medicaid block grants are. Medicaid block grants are often suggested as ways to cut federal spending while leaving states, or in this case Puerto Rico, holding the bag. Simply put, a block grant is a capped amount of federal dollars. In sharp contrast, Medicaid’s financing structure changes to align with a state’s changing needs during a time of economic recession or natural disaster. But with block grants, the funding remains stagnant irrespective of the changing needs.
The effects on children are devastating. Doctors are fleeing to the mainland or refusing to accept patients on Medicaid, leaving children without pediatricians. Without access to preventive care, children are more likely to have preventable hospitalizations and use overwhelmed hospital emergency departments for illnesses that should be treated by a primary care physician. The lack of access to specialists, like dentists, leaves children at risk of developing preventable chronic diseases like tooth decay. In extreme cases, these diseases can take a child’s life.
Medicaid is essential to protecting the health of our most vulnerable and poorest children. As evidenced by the crisis in Puerto Rico, block grants can undermine that progress and threaten the well-being of our nation’s most vulnerable citizens, including children. Congress should recognize the role it has played in both Puerto Rico’s health and fiscal crises and eliminate the Medicaid block grant limit that has been unfairly imposed on Puerto Rico.
In addition, the American people and our nation’s governors should learn this lesson and reject policy proposals, including those by presidential candidates or by Congress, to block grant the Medicaid program. Just as it has been a disaster for Puerto Rico, it would be for the rest of our nation as well.
L'Afrique francophone était jusqu'ici absente des classements de Forbes, qui dressent chaque année la liste des milliardaires en dollars dans le monde. Il y en avait cette année plus de 1800, selon le magazine américain. Parmi eux,29 Africains, mais aucun ressortissant d'un pays d'Afrique francophone au sud du Sahara.
Pour la première fois, Forbes est allé scruter les fortunes individuelles ou familiales dans ces pays. Premier constat : aucun francophone n'atteint jusqu'ici le chiffre d'un milliard de dollars, seuil minimal pour figurer sur la liste annuelle mondiale. Selon le classement du magazine dédié aux francophones subsahariens, deux Camerounais occupent les deux premières marches du podium : Baba Ahmadou Danpullo et Paul Fokam Kammogne.
La famille Rawji de République démocratique du Congo complète le podium, talonnée par Georges Forrest, un autre multimillionnaire congolais, 4e sur les 24 répertoriés. Ces fortunes se situent loin derrière celles des pays d'Afrique anglophone, d'Afrique du Nord et même celles de l'Angola, pays lusophone. Seuls points communs sur le continent, tous ces riches sont créateurs ou héritiers d'entreprises et ils répartissent leurs investissements dans plusieurs secteurs.
Le pays le plus pauvre du monde a aussi ses millionnaires
Madagascar,pays le plus pauvre au mondeselon la Banque mondiale, a aussi ses millionnaires en dollars. Quatre familles figurent dans ce classement. Toutes sont d'origine indienne ou française.
Ylias Akbaraly est en cinquième position du classement du magazine Forbes. Ce franco-malgache d'origine indienne a construit un empire à partir de l'entreprise industrielle familiale. Sa fortune est évaluée à 710 millions de dollars. Comme toutes les grandes fortunes à Madagascar, il est présent dans divers secteurs à travers son groupe Sipromad : l'industrie, le tourisme, l'aviation, l'immobilier, la sécurité. Il compte aussi des investissements en Afrique et dans l'océan Indien dans les télécommunications et les nouvelles technologies.
La seconde fortune de Madagascar est aussi d'origine indienne. Hassanein Hiridjee, 705 millions de dollars selon Forbes. De nationalité française, ce quarantenaire est à la tête d'un groupe en pleine expansion. En un an, il a conclu le rachat de la deuxième banque malgache, la BNI, et d'opérateurs téléphoniques à La Réunion et aux Comores voisines. Vient ensuite, en 11e position, Iqbal Rahim, Fondateur du groupe pétrolier Galana, d'origine indienne également. Sa fortune est évaluée à 419 millions de dollars. Enfin, la famille française Fraise est 23e au classement avec 208 millions de dollars. Elle est présente sur la Grande île dans l'énergie, les travaux publics et la vanille.
Madagascar est donc le 2e pays d'Afrique subsaharienne francophone dans ce classement de millionnaires. Un palmarès qui détonne pour un pays toujours en bas des tableaux internationaux en terme de développement et de climat des affaires.
Dans son édition de novembre 2015, le magazine américain Forbes vient de publier le premier classement des personnes les plus riches en Afrique francophone subsaharienne. Une partie du continent absente dans le classement annuel consacré aux plus grandes fortunes du monde. Ce premier classement du genre dresse une liste de 24 personnes créditées de plus de 200 millions de dollars.
