This weekend Puerto Rico will most likely fall short–there is some semantic argument on whether this constitutes default–on a $58 million payment due from its Public Finance Corporation. Many view this as a first step in debt restructuring, if for no other reason than it offers further proof of what Governor Alejandro García Padilla said last month, that its $72 billion as currently structured is “not payable.” A report released earlier this week, “For Puerto Rico There Is a Better Way,” by Centennial Group, International, at the behest of mutual and hedge fund bondholders, insisted that the debt was payable, but was roundly denounced this week because of its call for extreme austerity measures. Meanwhile, new efforts led by Congresspersons Luis Gutiérrez and Nydia Velásquez, began to exert more pressure on Washington to allow Puerto Rico Chapter 9 bankruptcy protection, although there are several outstanding questions on exactly what kind of restructuring will take place, who will be in charge of implementing the restructuring of the economy, and what specific plans are being made to take advantage of the temporary liquidity that would be provided by debt restructuring. This post/essay by the Center for the New Economy’s Sergio Marxuach brings up even more questions about the legal language stickiness of exactly what governmental agencies may be allowed to declare bankruptcy.
Doesn’t look good, does it?
Here’s an 11-minute or so interview I did with FAIR’s radio show “Counterspin” that re-tells the tale that is driving a lot of us to shake our heads (SOH):