Puerto Rico Steps Up Lobbying Amid Congressional Inactionby
Governor Garcia Padilla will return to Washington Wednesday
Treasury's Weiss to discuss debt crisis at Peterson Institute
Puerto Rico Governor Alejandro Garcia Padilla is making the rounds in Washington again. Flanked by mayors and legislators from the U.S. territory, he plans to make another plea to Congress Wednesday to help Puerto Rico before lawmakers adjourn for 2015.
While Garcia Padilla said at a Senate hearing as recently as last week that the island is running out of money and Democrats warned off a humanitarian crisis, Republicans, in control of both chambers, declined to act, pointing to the commonwealth’s lack of reliable financial data and questioning the costs of potential assistance.
With Congress unwilling to go beyond hearings and speeches, the pressure mounts on the Obama administration to step in and help the territory struggling under $70 billion of debt beyond a proposal for access to bankruptcy submitted in October. U.S. Treasury counselor Antonio Weiss is scheduled to speak about the Puerto Rican crisis in Washington Wednesday at a event at the Peterson Institute for International Economics.
“The next stage of action for relief is to push it back on Treasury,” said Bloomberg Intelligence analyst Nathan Dean. “Treasury is going to be limited in what they can do, but I think that’s the next step.”
The Obama administration urged Congress in October to give Puerto Rico broad restructuring powers, provide independent fiscal oversight and increase health-care funding, in addition to access to bankruptcy.
Republicans, including Senator Orrin Hatch of Utah, said doing so would alter the existing contracts between the island and the bondholders, echoing the arguments of investors such as Franklin Advisers Inc. and OppenheimerFunds Inc.
Without congressional approval, Treasury could get involved in a voluntary debt exchange, assisting Puerto Rico in persuading creditors to exchange the debt they hold now for a new, less valuable security, said Brandon Barford, a partner at Beacon Policy Advisors in Washington and a former Senate aide. Still, the department wouldn’t have any mechanism to force the investors to take the deal, he said.
Although some analysts have raised the possibility of Treasury offering loans or loan guarantees, such actions would not be on stable legal footing without the approval of Congress, Barford said.
Puerto Rico general obligations with an 8 percent coupon and maturing July 2035 traded Tuesday at an average price of 75 cents on the dollar, data compiled by Bloomberg show. The average yield was 11.2 percent.