Trump Reverses On Puerto Rico Debt Forgiveness: "We Will Follow The Bankruptcy Process"

One day after Donald Trump unleashed turmoil in the municipal market, launching a selling avalanche in Puerto Rico GO bonds which crashed to all time lows, shortly after the president signaled an openness to wipe out Puerto Rico's debts during an interview with Fox News on Tuesday, the White House has thrown cold water on the prospect of Trump forgiving Puerto Rico debt.

Recall that on Tuesday night, Trump told Sean Hannity that Puerto Rico "owes a lot of money to your friends on Wall Street and we're going to have to wipe that out," adding that "You can say goodbye to that." The next morning Puerto Rico bonds plunged, with the 8s of 2035 tumbling 10 points from 44 to as low as 32, an all time low, before rebounding modestly.

 

To be sure, the reason for the market freak out is that bondholders were on edge that just like Obama in the GM restructuring fiasco, Trump would overturn the traditional bankruptcy process, and favor one group of stakeholders over another. In this case Trump was convinced that Wall Street is the primary holder of PR bonds, although he may have changed his mind upon learning that well over half of Puerto Rico GO bonds is in retail investor and pension fund hands.

And, as a result, when asked about Puerto Rico's more than $70 billion in debt, White House press secretary Sarah Huckabee Sanders said that the best thing for the island will be for it to use the normal process set up to deal with its debt. In other words, no debt "wipe out", and instead the bankruptcy process would be observed.

"There's a process for how to deal with Puerto Rico's debt, and it will have to go through that process to have a lasting recovery and growth," Sanders said Thursday, adding that "that is a process that was put in place and set up under Obama, and has a board of advisers that deals with that debt. It'll go through that process as we move forward."

"The president wants that to go through that process and that’s the stage we’re at on that"  she concluded. In 2016, Congress established a debt oversight board tasked with controlling the island's budget and debts as a way to deal with spiraling debt in the country.

Sanders' comments were the latest attempt by the administration to walk back Trump's debt forgiveness suggestion: on Wednesday OMB head Mick Mulvaney told CNN that Trump should not be taken "word for word" and later told Bloomberg News "we are not going to pay off those debts."

Still, despite the administration's reversal, Puerto Rico bonds have failed to rebound from recent lows, and were just shy of all time lows following Sanders' statement.

Comments

freedom1798 Thu, 10/05/2017 - 15:38 Permalink

Well, shit, isn't bankruptcy the same as default?   Maybe the imbecile creditors will get pennies instead of nothing.  Big deal.  Nobody will loan to the spics again unless they get some sort of insured loan at 100% interest.

Muppet The Alarmist Fri, 10/06/2017 - 03:01 Permalink

Puerto Rico muni's are already backstopped by U.S. taxpayers thanks to Speaker Paul Ryan.  Just after becoming Speaker, Paul Ryan led and passed the Bill for U.S. taxpayers to backtop PR debt.  At that time, Ryan however announced that he appointed a blue ribbon panel that would ensure PR would steer away from any default and thus U.S. taxpayers had nothing to worry about.Overall, the U.S. has co-signed for PR.   I do not believe PR folks will migrate to FL because they'll get far much more money than they could have ever imagined just by staying in PR.   Jobs and cash for all.   Hey, the U.S. is paying.  Yay.

In reply to by The Alarmist

BeansMcGreens Al Gophilia Thu, 10/05/2017 - 18:25 Permalink

One should read this article:https://www.bloomberg.com/news/articles/2017-10-04/puerto-rico-will-run… Here is one of the quotes from the PR Treasurer."The treasurer said he has set aside funds to make payroll and pension payments in October. But if Congress fails to act, he said the island is facing a "total shutdown” on Nov. 1 that would curtail essential services and the distribution of aid.""Maldonado said he has requested between $6 billion and $8 billion in aid from Congress to keep the government running for “a few months.”Payroll and pension payments. Lot of overtime going on.

In reply to by Al Gophilia

garcam123 freedom1798 Thu, 10/05/2017 - 19:11 Permalink

Well shit isn't racist cocksucking white punk the same as spic?  So suck my fucking cock you piece of shit and I'm a white boy you punk! And I fucked your pig mother in the ass.....that's where you cum from strained through the filthy sheetafter I wiped her stinkin ass motherfucker! OH! and by the way suck my cock you piece of shit!

In reply to by freedom1798

BritBob Thu, 10/05/2017 - 15:38 Permalink

Look out for the UN!The UN C24 with such members as Iran, Syria, China, Cuba and Russia want to muscle their way into US Puerto Rico affairs:The United Nations committee on independence for colonies yesterday passed its annual resolution asserting Puerto Rico’s right to self-determination and independence. The U.N. has identified three options for a territory’s self-determination: In addition to independence, what would be statehood in the United States and nationhood in an association with another nation that either nation could end. Popularly known as the decolonization committee, the panel created in 1961 has never had jurisdiction concerning Puerto Rico’s political status. Despite this, it has passed resolutions on the subject since 1972. It has not, however, been able to get its resolutions further approved in the U.N. The U.S. Government has blocked its efforts. A little bit of information on the said committee -Falklands – UN C24 Committee: https://www.academia.edu/11274445/Falklands_-_UN_C24_Committee

garcam123 BritBob Thu, 10/05/2017 - 19:21 Permalink

FYI........nobody give a fuck about you and all your rotten teethed brethern, although I did have an English Lady as a girlfriend once.....bitch teaed me to fucking death along with the fucking Bubble and Squeak, Bangers and Mash, Yorkshire pudding......ta!  But she was a good girl in the sack......Mi Lord! Damn if she didn't make me sleep good!

In reply to by BritBob

GunnerySgtHartman Thu, 10/05/2017 - 15:40 Permalink

Good.  Make PR to go through the process.  If PR's debt had been forgiven or otherwise made whole by the US taxpayer, a disastrous precedent would have been set for the states which have pension funds on the edge of collapse - like Kentucky.

RougeUnderwriter Thu, 10/05/2017 - 15:57 Permalink

Isn't a muni bankruptcy (Chapter 9 filing) different from a CH 11. Some of this muni type debt is required to be paid back by increasing taxes first isn't it?? General Obligation Bonds take the full hit but Bonds back by a tax or revenue stream get special treatment don't they? Whom ever owns this crap is fully aware of where they sit in the pecking order of recovery and will petition the court to better that position.

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/cha…

RagaMuffin Thu, 10/05/2017 - 15:46 Permalink

"There's a process for how to deal with Puerto Rico's debt, and it will have to go through that process to have a lasting recovery and growth,"  In the US its called a bailout   \S

Don Sunset Thu, 10/05/2017 - 15:47 Permalink

Numerous states from Illinois to Rhode Island (some of the "NE" states are the worst) are watching this process closely.  Can't wait to be free of debt.

Bemused Observer Nigger Rich Thu, 10/05/2017 - 17:10 Permalink

It comes in more user-friendly increments, is more accessible to the common man, thus making it more useful for transactions of the day-to-day variety. Gold, being slightly more rare, is more suited for the storage of wealth, or for very large transactions, such as real estate, or even the trade between nations. Think of gold as your bank account, and silver as your monthly budget money.

In reply to by Nigger Rich

hooligan2009 Thu, 10/05/2017 - 15:48 Permalink

Pueto Rico is broke. Its citizenry of 3.4 milion accumulates debt at the rate of 2 billion a year - it cannot pay its way.the 70 billion of debt represents payments to banks evading taxes, lawyers structuring tax evasion transactions, governments taking bribes and endemic corruption on a libtard socialsit states that it is another cuba.the country could spend 50 billion on repairs in the countryside outside San Juan and leave Puerto Rico in the same state it is now - that is, a failed libtard socialist demonrat run nation state.or 10 billion could be spent on buidling houses, roads, schools and hospitals outside San Juan.my bet is that libtard socialist demonrat polticians will get 50 billion over ten years to spend on libtard demonrat socialist policies - that is, on bribery, corruption and otherwise odious government spending.by the way - why does it take so long to decleare Puerto Rico in bankruptcy - it is walking like a duck, talking like a duck and behaving like a bankrupt duck.trump should put it into adminstration by executive order, appoint an administrator and sack the government and all its politicians.after all, the insurance companies will pay nothing towards puerto rico - because:Force Majeure[French, A superior or irresistible power.] An event that is a result of the elements of nature, as opposed to one caused by human behavior. The term force majeure relates to the law of insurance and is frequently used in construction contracts to protect the parties in the event that a segment of the contract cannot be performed due to causes that are outside the control of the parties, such as natural disasters, that could not be evaded through the exercise of due care. 

Vilfredo Pareto Thu, 10/05/2017 - 16:02 Permalink

Everybody with a Puerto Rican bond needs them zeroed out lol. I know that won't happen.  I hope they get ten cents on the dollar and then we have set a nice precedent for Chicago in 2025