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Puerto Rico Avoids $354 Million Default With Absurd Revenue "Clawback"
Earlier today, we noted that it was decision time for Puerto Rico.
Staring down a $354 million debt payment, Governor Alejandro Garcia Padilla had to decide between defaulting on $273 million in GO debt (the portion of the payment guaranteed by the National Public Finance Guarantee Corp.) and holding onto cash the government needs to provide public services for the island’s citizens.
This time, we said, actually is “different.” Why? Because unlike August when the island paid only $628,000 of a $58 million payment, defaulting on GO debt would lead directly to litigation. Of course, as one creditor told Reuters, "even a default on the non-GO portion could result in litigation against the GDB. Everyone would sue. It would be really messy."
Yes, “really messy”, and no one likes a mess, which is why Padilla decided to screw over another group of creditors in order to avoid defaulting on the GO debt.
As Bloomberg reports, “Governor Alejandro Garcia Padilla signed an executive order to permit the redirection of revenue budgeted for highway and convention center bonds and other agencies to pay for debt issued or guaranteed by the commonwealth.”
Amusingly, Padilla announced the decision at today's Senate Judiciary Committee hearing during which lawmakers debated whether or not to allow certain commonwealth agencies to declare bankruptcy. The bondholders left out in the cold as a result of the "clawback provision," should have known better. "The commonwealth said in a Nov. 6 financial filing that it may take revenue already used to repay Highways and Transportation Authority bonds, convention-center debt, and Puerto Rico Infrastructure Financing Authority bonds and redirect that money to pay down general-obligation securities," Bloomberg notes.
Height Securities Daniel Hanson (who predicts that social unrest may be in the cards if Padilla can't make government payroll) says the affected bondholders effectively have no recourse. About the only thing they can do is check to make sure the money actually went to repay the GO debt: “There’s going to be a legal process here to validate that any claw back that has occurred is being used consistent with the payment of constitutional obligations."
Still, the diverted revenue may not be enough to cover all of the commonwealth's GO payments.
Moody's wasn't impressed: "The payment indicated the commonwealth is making an effort to avoid litigation and prevent further deterioration in relations with its creditors, [but we] continue to view default as likely on future commonwealth debt payments."
Obviously, this isn't a sustainable way to do business going forward and in case it's in any way unclear what's going on here, we'll leave you with what Padilla told Congress on Tuesday:
"Let us be clear: We have no cash left. This is a distress call from a ship of 3.5 million American citizens that have been lost at sea."
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Mark to fantasy forever!!!
You can only run from the pack of wolves for so long.
Promises from liars are worthless...how could this happen?
RIPS
Somebody get them a tow!
Growing up in NY in the 70's, if you called a Puerto Rican an "American", you would have gotten your ass kicked by the non Puerto Ricans. Just sayin...
How did they get in so much debt? A couple of power plants that they paid 4x market for or something?
Some Congressman said it might tip over !!
No, he wast allying about Guam, but then again he probably dowamt know the difference between the two islands half a world away.
Just one more thing we have to thank Woodrow Wilson for... Fuck 'em, we have our own problems...
I hate to come across as Mr. Negative, but the Guam-tipping-over episode says all you need to know about the quality of the elected leadership of Black America.
And may God have mercy on us all....
How did they get in so much debt?
The people didn't, the politicians did.
It's called Odious Debt
In international law, odious debt, also known as illegitimate debt, is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.
"3.5 million American citizens"
The people of Puerto Rico are citizens of the United States, Inc. under the 14th amendment to the Constitution of The United States of America. They are not native born "American" citizens ( American, as in one of the several united States.)
People born in Federal Government Territories or naturalized US citizens are subject to the laws of the corporate State located in Washington, DC. Anyone born in Puerto Rico does not have all the rights as outlined in the original Constitution. They only have the civil rights the Federal Government allows them to have in the 14th amendment.
Ahh, so they are Imperial Citizens.
Republic citizenship, of course, having been superceded by the said 14th amendment. Which is why the American Republic died with the defeat of the South in the Civil War.
Abandon ship!
Do salvage laws apply here, or not until they run aground?
He said the ship HAVE not HAS so maybe there is more than one ship. Good luck salvaging.
Sounds like some construction projecs will be coming to a halt, and some union members will be getting laid off...
I say we bail out PR completely and grant them independence from the US.
In return PR takes all of the "Syrian" refugees. Not just Obama's. All of them
We're on a nautical theme here - get with the program
Maybe you should have thought about spending what you don't have.
"Lost at sea"?!? Maybe they shouldn't have loaded the boat with freeloaders, who were too loaded on the Dom, the coke, and the hookers to get out of their own way...
Payback's a bitch, Gov...
Should not have borrowed the money if you couldn't pay it back....
Drunk with debt and building more debt for all these years.
no different than Chicongo, only the numbers are much, much smaller.
fucking pussy...
hit the default button asshole.....
ps: and look at the Dow and S&Piss...
You have to love the "poor us, we are lost at sea...help!". What the f*ck? Since when did taking responsibility for your past actions become such taboo....?
November 1980?
Have *snap* elections, blame the other guy.
Legally elected representative, huh ?
Take his job and his money away from him.
He is a criminal.
Deal with him accordingly.
feed him to the citizens.
Range: 500 yards.
Speed: 4 knots.
Prepare tubes 1 and 2.
Fire 1! Fire 2!
aye,aye, gyro angle?
Gyro? I ordered the falafel.
Another wake-up call for all those who think their little pension pile, whether in a company pension fund, local government pension fund, or life insurance product, is going to stay put once the Feds need more money.
Amen brother. And as one who is living on a part time job and early SSN, the future is looking kind of grim.
Tis my own fault though. Unlike my fellow whining boomers, and younger folks as well, I accept 100% responsibility for my own personal shitty financial position. My own bad decisions got me where I am today.
That said...
I'm better off than most since I have my savings in the form of "real money" that I can hold in my hands. I also live in a place where many like minded folks live.
It's not paradise. We have our own brand of hooligans, hoodlums, and hard asses here in MT. Thankfully, we don't have a demographic like Chicago or Detroit.
I'll survive the shit storm one way or another.
hairball :)
Still stackin'
just a new can to kick
same road....
"Social unrest" Why do writers insist on using this pathetic euphemism? When what they really mean is:
Fuckin' RIOTS and blood in the streets!!
Talk about "pussies"
Like Hank Paulson?
Sell Puerto Rico to the highest bidder...maybe China would buy it?
Bull.
Ish.
American Citizens left out to sea? They are all coming here. Cubans, Puerto Ricans, South Americans, Muslims, Mexicans Damn
Hey Vlad Want to buy and Island for a Military Base
The old Puerto Rican Switcheroo. May as well piss off as many people as possible. All right in front of congress.
This is merely the beginning of what is going to be an extremely ugly, and disorderly, default. Lawyers are lining up left and right to sue for various bond holder groups which are going to be subject to the "clawback".
I've been to PR.
Let the lazy fucks in PR sue and win the court battles.
And when it's all over, then who's going to lend them money, and if they do lend, at what price?
Everyone will lend them money in this easy money chase yield environment. They'll probably only have to pay 1/2 percent interest on their bonds or maybe they could get away with negative rates. I wouldn't doubt any of the above with the fed retardation of the market.
"Help! We are running out of other peoples money.."
So now they are "Americans" HAHAHAHA American when it's convenient and you want a bailout but when things are good, fuck America we want our independence. Puerto Rico, go buy The Donalds book then tell your creditors to go piss into the wind, I bet they will negotiate with you for penny's on the dollar.
Anyone stupid enough to (temporarily) save them deserves whatever they get.
man, don't tempt the obama. he will be stupid enough for all of us and use our money to do it.
Sounds like it might be a good time to buy a house and some farmland in PR.
Later, perhaps.
Right now, anybody with a PR asset that can be encumbered is about to get the Old Man of the Sea super-glued to their shoulders.
Let the ship sink and the life boats as well. We should let Puerto Ricooo go its own way!
Or we could lift them all off the island and ship them to Detroit to participate in the new survival games. We now have three teams. (1) Home team Michigan, (2) Syrians and (3) Puerto Ricoans. Winner take all battle to the end.
Then the bondholders get the Island and they can sell it off. Only American citizens are allowed to purchase and hey you would probably have paradise.
Fortuno tried to straighten out the Islands spending addiction a few years ago.......he only got one term.
50% of the Rock is on the dole or the govt payroll.
Time to sink the place.
Sounds a lot like that cesspool Guam.
Tsipras has most recently demonstrated how to orchestrate
the final steps to permanent debt servitude.
First, reject, in deed though not necessarily in word,
any alternative to paying the supposed debts owed the financial oligarchy..
Second, completely bankrupt the economy by squeezing out every last
available penny to pay off even the most odius of debts.
Finally, when complete utter destitution is reached, welcome
some variant of an IMF/TROIKA cabal to implement "austerity" and asset seizures.
(coming soon to the 50 states, one by one.)
Lost at Sea is a good analogy - it implies that the Captain of the ship and the other officers are idiots!
We are living in a false reality with a mass of bodies that don't know what they don't know but believe they are entitled geniuses because they once stayed at a Holiday Inn.
Charles Fort "Book Of The Damned"
Better to move to Grease
What is it about Latino governments that make them such piss-poor money managers?
They watch Ass not dollars
I suspect it comes from the communal Indian gene. I’ve got it myself, and my wife rips me a new one for giving money away to some down and out dude. The Anglo side of me says let the idiot suffer from his bad choices. The Mexican side says help the dude it’s better than buying some t.v. preacher a new jet.
Double post
Maybe Grandma Clinton can loan them her 'reset button'.
Nope. She donated it to the Clinton museum at a declared value of $25 million and borrowed against the declared value from the Clinton foundation to finance her campaign and then never repay so it becomes the loss of a tax free entity and not subject to legal discharge. She is evil not stupid. FVS
"Let us be clear: We have no cash left. This is a distress call from a ship of 3.5 million American citizens that have been lost at sea."
"Let us be clear: We have no cash left. This is a distress call from a ship of 3.5 million American citizens who have been towed out to sea."
There... I fixed it for him.
This whole nautical theme has me confused - guess I'll wait for a landlocked bankruptcy - shouldn't take long
too bad their name isn't goldman sachs ho ho ho
Big Pharma tested the Pill on PR women in the '50's specifically because they were poor,
desperate and wouldn't be litigating class action (signed a waiver?got a brain tumor? Sorry!).
Should be a law limiting the percentage of public sector jobs (future unfunded liabilities) in any
society on this planet.Someone compared PR to Chicago? Pretty close....
If there are aliens watching this planet they must be laughing their tits off....
Most of the pictures of aliens I've seen - no tits. Bearded dudes but they are laughing their tiny balls off
You know, I've got to try this with my own finances.
First I pay the VISA bill, then I claw back the money and pay the Amex bill, and then I claw that back and pay the electric bill. Hell, I can finally afford to get the cable turned back on.
"Let us be clear: we have no cash left."
Tango Sierra
*except to pay MY salary and a few minor, but perfectly reasonable, expenses.
Debt doesn't matter.
The Commonwealth will get the restructuring they want. The public agencies (Electric, Highway, and Aqueduct) will be restructured and bondholders, primarily state specific mutual funds which are primarily a retail product, will be wiped out. The Debtors in Possession are already in for 50 cents on the dollar on the best credits (G.O.’s & COFINA). The bonds are still paying the coupon so a workout at 75 or 80 is a home run for them. Goldman added a billion to this name over the last twelve months. Plus its tax loss season so you’ve all got time to pick off the retail sellers while they are still in capitulation mode!
PR is Detroit with the added chance of drowning.
"Buying on credit is so nice!"
Anita - West Side Story
Ha. Ha. Frankly, you'll be shocked at the number of 'Clawbacks' that will materialize as TSHTF....Hint, hint (Wall St., and basically ANYONE who benefitted from the RAPING and PILLAGING of America).... Wake up 10%, you're day is a comin' and most of you earned it!
...to make for glorious benefit of Commonwealth of Puerto Rico's pride of socialism and spending for peoples most happy...
OK... Borat did Kazakastan but the gist is the same...socialism does not work in the long haul...something about running out of other people's money or at least the ability to steal it without repercussions...
I have relatives like this...if there is a way to borrow money, they borrow it...repayment almost does not cross their minds.
.w ehave no idea how it happened...suddenly we owed a bunch of people a bunch of money...