Congressional GOP Leaders Pulling A Maniacal Merkel With Puerto Rico Debt Restructuring By Refusing Assistance As Bond Holders Demand Payments
Newly elected Republican Speaker of The U.S. and Ayn Rand enthusiast, Paul Ryan, along with Senate Majority Leader Mitch McConnell have ordered their armies of GOP congressional members to block any provisions in the newly signed federal spending bill that would help the debt ridden U.S. Territory of Puerto Rico which consists of 3.5 million U.S. Citizens.
Puerto Rico has a whopping $72 billion debt with a $957 million payment due on January 1st. If Puerto Rico fails to make the payment January 1st, it will be the largest municipal bond default in American history dwarfing Detroit’s 2013 bankruptcy of $15-$20 billion.
Former New York Lieutenant Governor Richard Ravitch, who steered New York city through its financial troubles in the 1970s, and assisted Detroit Emergency Financial Manager Kevyn Orr through Detroit’s bankruptcy has been an adviser to Puerto Rico’s government and a major advocate of a special “territorial” bankruptcy provision for the island since U.S. Bankruptcy Code has no provisions for unincorporated U.S. Territories.
Ravitch told the New York Daily News, “The hedge funds won, they got their way in Congress,”
Puerto Rico Governor Alejandro Garcia Padilla now finds himself in a similar situation as Greece and the Trioka. If Padilla makes the January payment of $957 million and the hundreds of millions more that are due monthly in 2016, Puerto Rican government will be forced to continue with severe draconian austerity cuts.
With nearly 337 U.S. mutual funds holding Puerto Rican debt, Padilla’s second option would be not pay and force a showdown with Wall Street bond holders when the market begins feeling the tremors of the default.
The fight could get expensive and nasty as bond holders are expected to use any legal means necessary to collect their money.
In August, CNN reported that Franklin Templeton’s co-heads of the municipal bond group wrote in a blog post, “At the very least, in our assessment, Puerto Rico can expect creditors to seek legal affirmation and protection of contractual rights.”
A spokesman from Oppenheimer Funds told CNN they expect the Commonwealth to act within the tenets of the law,” including the Commonwealth’s Constitution, and are ready to defend the previously agreed to terms in each and every bond indenture,”