Senator Hatch Demands More Transparency From The Puerto Rico Government And Federal Oversight Board… Government Accountability Office States Distorted Financial Practices Responsible for Puerto Rico Woes… One of Three Likely Routes Will resolve Commonwealth-COFINA Dispute… Oversight Board Certifies 1st Consensual Debt Restructuring…
A Major Win For Bondholders… At a May 21 hearing Judge Dein, a member of Judge Swain’s legal team, made a very important ruling that rejected the Oversight Board and Commonwealth’s efforts to block bondholders from accessing public documents. Legal analysts who attended the court hearing report the ruling paves the way for bondholders to litigate the current Fiscal Plans. The ruling will expose the analysis used to create the current Fiscal Plans to expert scrutiny and examination. All documents pertaining to the current Fiscal Plans and all future Fiscal Plans must now be furnished automatically. The Oversight Board’s and the Commonwealth’s effort to evade accountability and limit transparency from creditors appears to have failed. As Puerto Rico delays negotiation with bondholders the Puerto Rico economy continues to show resiliency. The Island’s total cash position now exceeds $8.5 billion. The delaying strategy may eventually work against the government and Oversight Board by weakening their dire financial position claims.
Senator Hatch Demands More Transparency…Washington - In the spirit of promoting the “PROMESA” legislation, the chairman of the Federal Senate Finance Committee, Orrin Hatch (Utah) introduced the Puerto Rico Economic Empowerment Act of 2018. He also showed his disappointment regarding the operation of the PROMESA Law and the lack of transparency of the government of Puerto Rico. The Senator emphasized his frustration with the “PROMESA” Law, the actions of the government of Puerto Rico and to some extent the Federal Oversight Board.Republican Hatch went to the Senate of the United States to highlight his bill together with his colleague Marco Rubio (Florida), to process recommendations made in a 2016 report by the Group of the Congress on Economic Development in Puerto Rico, which he chaired. In addition to explaining the main initiatives of his project, Senator Hatch took the opportunity to let go of his frustrations with the authorities of the Island. The senator who retires in December from the Senate, but still controls the tax issues denounced the lack of transparency of the government of Puerto Rico to some extent the Fiscal Supervision Board in charge of finances of the Island, and defended federal restrictions on access to funds to mitigate the disaster caused by Hurricane Maria.He also regretted that the voluntary negotiations on the restructuring of the public debt that were ordered under the PROMESA law have not advanced and that the statute has not avoided numerous lawsuits and multiple demands between the creditors and the government. “The promise of voluntary debt resolutions has not been met, even for a restructuring agreement between the creditors and the Electric Power Authority, which had been agreed by both parties,” he stressed. The Republican senator stated that since 2015 he has been asking for audited financials, there has been no audited financial statements from the government of Puerto Rico since 2014. “This is obviously problematic when you’re trying to figure out how to help Puerto Rico”, Hatch stated. That is why I support greater transparency in the Puerto Rican government, as well as in the Oversight Board. As always, we have a duty to taxpayers to prudently protect their dollars, which cost them so much to earn, so they are not channeled into inefficient or wasteful uses,” Hatch said. The Republican politician also alluded to the sudden revelation made by the Puerto Rican government in December that it had almost $ 7,000 billion in dozens of bank accounts. “It's just one of many examples of how disorganized and inconsistent accounting continues to prevail in Puerto Rico, damaging the credibility of the government,” he said. The government of Puerto Rico has been, and remains, largely opaque.At the same time, when talking about the measures he included in his bill 2873, Hatch closed the door to revise the federal tax reform law to give preferential treatment to Corporations of Foreign Control (CFC) based in Puerto Rico, and to promote the access of the residents of the Island to the federal tax credit for accrued income. Hatch said he cannot support “the views of some in Puerto Rico, including government officials, that they were somehow out of our tax reform efforts because they did not receive a special exception that was not available to anyone else.” Through his bill, Hatch proposes to reduce from 6.2% to 3.1%, for 24 months, the payroll deduction of Social Security payments, with the idea that workers receive a larger check. The measure promotes full access in Puerto Rico to the reimbursement for the federal child tax credit, which can be up to $ 2,000 per dependent. The legislation also facilitates access to loans and benefits from the Small Business Administration (SBA), and proposes to improve statistics on the Island. Hatch said his measures could represent an economic injection of $ 3.5 billion for the Island. Speaking of the importance of having reliable data, Hatch came out in defense of the Institute of Statistics and said that it is threatened by “an ill-conceived effort on the part of the government of Puerto Rico to make significant changes and potentially politicize the Institute.”
Government Accountability Office States Distorted Financial Practices Responsible for Puerto Rico Woes… On Capitol Hill, a PROMESA-authorized report puts a spotlight on rampant financial mismanagement on the Island. The Government Accountability Office report to U.S. congressional committees reveals that the Island’s policies are largely the blame for Puerto Rico’s woes. The report notes that the lack of audited financials barred investors from analyzing risks and suggests that the triple tax exempt status of Puerto Rico bonds made Puerto Rico bonds attractive. Validating the GAO report, Governor Rosselló’s Chief of Staff resigned amid a corruption scandal. The Puerto Rico administration informed that past due audits should be available between June 2018 and June 2019. “The findings of the GAO report will help inform this process,” PROMESA co-author House Natural Resource Cmte Chair Rob Bishop stated that the Island will recover as leaders take to heart the seriousness of mismanagement.
One of Three Likely Routes Will Resolve Commonwealth-COFINA Dispute…Three likely routes: Mediation, Summary judgement ruling or Puerto Rico Supreme Court certification, could resolve the Commonwealth-COFINA Dispute expeditiously. Judge Swain has taken under advisement the certification of Puerto Rico law questions pertaining to the COFINA enabling legislation. COFINA defendants put forward coordinated and persuasive arguments supporting Supreme Court certification opposed by the Commonwealth Agent. Bondholders anticipate a June 6 Court Hearing to gauge the direction of the courtroom.
Oversight Board Certifies First Consensual Debt Restructuring…Oversight Board approved and certified the Government Development Bank (GDB) debt restructuring. The structure will enable bondholders to exchange claims for new bonds at an upfront exchange ratio of 55%. GDB bonds were unsecured appropriation debt.
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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