Disaster Spending Would Benefit Puerto Rico, but Fate Remains Uncertain

The U.S. House of Representatives has queued-up a $12 billion disaster spending bill, which would include $600 million in additional Nutritional Assistance Program (NAP) funding for Puerto Rico. Without the provision, the Island will run out of NAP benefits in March. Another provision would add $5 million for a study on the effects of boosts in post-hurricane nutritional assistance, which most recently extended benefits to more than 110,000 Puerto Ricans who did not previously qualify for assistance. In addition, the bill would allocate $25 million for dredging projects in the Caño Martín Peña canal in San Juan, thanks to an initiative by Puerto Rican Congresswoman Nydia Velázquez (D-NY).

The bill was approved by the House Appropriations Committee and is up for a full House vote, but it is likely to be stymied by a provision that would end the federal shutdown and reopen the government without providing funds for President Trump’s proposed border wall.

Judge Swain Weighs COFINA Agreement at Hearing

Federal Bankruptcy Judge Laura Taylor Swain will hold a hearing to decide whether to approve a Title III debt restructuring agreement with Sales Tax Corporation Fund (COFINA in Spanish) bondholders. The agreement, which was approved by a majority of COFINA bondholder groups, would restructure $17.6 billion, or almost a quarter of the Commonwealth’s public debt obligations.

The 40-year agreement would reduce Puerto Rico’s corresponding debt by 32% and includes significant recovery provisions for local bondholders. Overall, the agreement would slash about $17 billion in debt service payments. However, senior COFINA creditors would get a 93% return on investment, while junior creditors would receive 55%, according to press reports. Several protests have taken place outside the federal courthouse in San Juan against the deal, with critics saying that it is too generous towards creditors.

FOB Calls for Cancellation of $6 Billion in “Illegal” Puerto Rico Debt

This week, the Fiscal Oversight Board (FOB) joined the Unsecured Creditors Committee (UCC) in calling for the cancellation of $6 billion in Puerto Rico debt. The FOB and UCC are calling on Judge Swain to declare that $6 billion in bonds were issued illegally because they exceeded the Commonwealth Constitution’s debt limit. Specifically, the Board is questioning debt accrued under Governors Luis Fortuño (New Progressive Party) and Alejandro García Padilla (Popular Democratic Party). Judge Swain has decided she will take up the emergency request at a hearing scheduled for January 30.