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Wednesday, Sep 27, 2017

Seema Balwada, CFA / September 27,2017

Latest On The United States Government Aid Response in Puerto Rico

PREPA Bondholders Offer $1 Billion Loan To Restore Power

Puerto Rico Electric Power Authority’s (PREPA) creditors are offering to lend the bankrupt utility a $1 billion Debtor In Possession (DIP) loan to help after Hurricane Maria damaged the utility system so severely that the entire Island was left without power. The potential financial lifeline from investors holding $3 billion of the utility’s bonds would be subject to terms and conditions.

Puerto Rico And U.S. Department of Energy Officials Are Racing To Restore Electricity

It may cost billions of dollars to repair PREPA, as Puerto Rico’s electric utility is known. According to the U.S. De-partment of Energy Puerto Rico’s severely damaged electrical grid may be beyond repair and could require rebuilding. Bloomberg reported FEMA may allocate as much as $9 billion to PREPA, depending on the federal agency’s matching thresholds. PREPA needed $4 billion of repairs to upgrade its system even before Maria struck the Island last week.

PREPA To Finish Puerto Rico Grid Damage Analysis In Days

“Puerto Rico Electric Power Authority’s post-Maria damage assessment, needed to file a FEMA aid application for engineering, construction and logistical funding, will be ready in days,” said New York Power Authority (NYPA) CEO Gil Quiniones. The FEMA application is needed before utility workers from mainland U. S. and equipment needed could be deployed to Puerto Rico. Quiniones visited San Juan September 22 with NY Governor Andrew Cuomo, state police officials, homeland security, emergency services, National Guard and NYPA members who remained to help with assessment and repairs.

Judge Swain Overseeing Puerto Rico Debt Restructuring Awaits Input

The Government of Puerto Rico and the Financial Oversight and Management Board have requested that the Court post-pone hearings that were previously scheduled to take place this week and next week. In light of the immediate crises and need for attention to the safety and stability of day-to-day life for the people of Puerto Rico, the Court grants their requests. The Court hopes that Puerto Rico will benefit in the coming days from the delivery of substantial portions of the massive federal aid that is needed immediately, in supplies, expertise and services, to ensure the safety of American citizens living in Puerto Rico and their retention of the foothold they have established on the path to economic recovery. The Omnibus hearing, currently scheduled for October 4, 2017, is adjourned to a date to be determined by the Court after consideration of further input by parties in interest. Any requests or comments concerning the timing of that hearing must be filed by 12:00 pm on Thursday, September 28, 2017. Puerto Rico is expected to request October 18 as the new hearing date.

Puerto Rico Expects U.S. To Lift Jones Act Shipping Restrictions

 Puerto Rico Governor Ricardo Rosselló said today he expected the Federal Government to waive the Jones Act, which would lift restrictions on ships that can provide aid to the Island devastated by Hurricane Maria. The Jones Act requires that all goods shipped between U.S. ports be carried by American owned and operated ships. A waiver would allow Puerto Rico to get help not only from U.S. ships but from any ships that can bring aid. Republican Senator John McCain asked for a permanent halt to the Jones Act. McCain said Puerto Rico residents would continue to pay up to twice as much for food and other imported goods without a permanent waiver. U.S. shipping industry opposes a waiver.

Small Business Administration (SBA) Offers Puerto Rico Residents Disaster Loans

SBA loans are granted when those affected are not covered by FEMA or insurance. The SBA disaster program is for small business, homeowners, renters and non-profits. The SBA is offering up to $2 million for business loans to repair structural damage, economic loss and operational capital. For individuals whether a homeowner or tenant for structural damage loans can be up to $200,000. Loans for replacement of household goods, clothing and automobiles can be up to $40,000. Interest rates can be as low as 1.8% and loans are for 30-years.

Trump: “Puerto Rico Needs A Lot Of Money”

President Trump will go to Puerto Rico next week to oversee ongoing rescue and relief efforts on the Island devastated by Hurricane Maria. With this visit and with bipartisan support comes the opportunity to help “Make Puerto Rico Great Again”. President Trump won’t go to Puerto Rico to fundraise or campaign. He’ll go to show the people of Puerto Rico that he cares, to see the Island’s wide damage up close and personal, and to make sure that the Federal Government and mainland Americans realize he understands Puerto Rico’s plight. President Trump’s business reputation as a “doer” who can get re-sults is essential now more than ever, as the hurricane has knocked out most of the Island’s power and basic infrastructure.

The Republican Congress has taken the lead in trying to help Puerto Rico restructure its debts. PROMESA, crafted last year to address the economic crisis, satisfy bondholders holding Puerto Rican debt, and protect U.S. taxpayers from another bailout, was a necessary first step. But to “Make Puerto Rico Great Again” and hasten the restructuring of its debt will require more than Congress. It will need the attention and leadership of the President.

President Trump will not only see the effects of Maria, but also have an opportunity to discuss the deeper and equally damaging effects of the Puerto Rican debt crisis with Governor Rosselló and the Island’s business community. Trump tweeted about Puerto Rico debt Monday night: “Billions of dollars in debt owed to Wall Street and banks which, sadly,  must be dealt with.”

After experiencing the negative effects of big, unsustainable government, Puerto Ricans may be more receptive than ever to conservative ideas and solutions such as limited government, fiscal restraint, and serious entitlement and regulatory reform that will attract new investment to the Island and grow their economy. 

Hurricane Maria has made Puerto Rico’s financial crisis front page news. In order to aid Puerto Rico and with the hope of building political capital, politicians from both parties are lining up to give financial aid and rescue packages. President Trump has now focused on Puerto Rico. The result of his visit could, to a degree, silence critics who say his handling of Puerto Rico’s hurricane disaster and financial crisis has been insufficient. Knowing he has bipartisan support President Trump’s visit can bring about huge benefits for all parties involved in Puerto Rico’s economic recovery.

If you have any questions or desire updated information contact your GMS Account Executive. Information taken from sources deemed reliable. This update does not purport to include all available information

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