dado potato
9-30-19, 8:46pm
The objective was to put the island US Territory of Puerto Rico on a financial footing as sound as the average of the 10 shakiest of the 50 states. So, there is a real possibility that PR will emerge from this bankruptcy, only to require another restructuring down the road 5, 10, or 20 years in the future,
In 2016 Congress passed the "Promesa" law, enabling PR, unlike any US state or territory, to file bankruptcy,
Bond-holders will take haircuts that will vary according to when the bonds were issued. Those bonds that were issued in excess of the territory's debt limit will receive the most severe haircuts, on the theory that the bond-holders would not fight for more in U S District Court, for fear that the bonds in question would be cancelled outright by the judge.
Perhaps of greatest interest to struggling states like IL, NJ, etc., who have unfunded pension liabilities which the courts have said they cannot legislate their way out of paying, Puerto Rico's plan of adjustment calls for cuts to 40% of the pensions being received by retired public employees. Mind you, there is no money in the pension fund, but hopefully there will be money, when PR emerges from bankruptcy. The plan of adjustment places retirees in a favored position compared to most bond-holders, for the reason that the island economy depends in part on these retirees continuing to have an income, so they can spend some dollars on consumption. Public sector retirees receiving monthly pensions greater than $1,200 would have their pensions cut by 8.5%.
Before a US state could propose anything comparable for its retired employees, Congress would need to pass (and the President sign) a law enabling the state to file for bankruptcy... a "Promesa" for the mainland!
In 2016 Congress passed the "Promesa" law, enabling PR, unlike any US state or territory, to file bankruptcy,
Bond-holders will take haircuts that will vary according to when the bonds were issued. Those bonds that were issued in excess of the territory's debt limit will receive the most severe haircuts, on the theory that the bond-holders would not fight for more in U S District Court, for fear that the bonds in question would be cancelled outright by the judge.
Perhaps of greatest interest to struggling states like IL, NJ, etc., who have unfunded pension liabilities which the courts have said they cannot legislate their way out of paying, Puerto Rico's plan of adjustment calls for cuts to 40% of the pensions being received by retired public employees. Mind you, there is no money in the pension fund, but hopefully there will be money, when PR emerges from bankruptcy. The plan of adjustment places retirees in a favored position compared to most bond-holders, for the reason that the island economy depends in part on these retirees continuing to have an income, so they can spend some dollars on consumption. Public sector retirees receiving monthly pensions greater than $1,200 would have their pensions cut by 8.5%.
Before a US state could propose anything comparable for its retired employees, Congress would need to pass (and the President sign) a law enabling the state to file for bankruptcy... a "Promesa" for the mainland!