The Promesa Wolf Visits Abuelita
Back in 2017, when the Puerto Rico Oversight and Economic Stability Act (Promesa) was just a wolf pup, this journal delivered a conference on the Hill focusing on Title V—for the expediting of critical infrastructure—in the federal law. During that conclave, hosted by the Associated General Contractors of America-Puerto Rico chapter, former Detroit Emergency Manager Kevyn Orr foretold what to expect in Puerto Rico’s debt restructuring of $72 billion, which towered as the largest U.S. municipal bankruptcy at the time.
Orr explained that there would be plenty of kicking and screaming in the initial stages because of the excruciating pain involved in the process. In Detroit’s case, Orr played henchman without a junta while bankruptcy Judge Steven Rhodes cut debt in what some creditors have called a kangaroo court. The proceedings prompted Judge Rhodes to give really tight haircuts to creditor constituents, and the municipality to give away pricey waterfront real estate and valuable parking lots, coliseums and such to creditors who had liens in bond covenants that made those deals somewhat palatable. Todo el mundo no muy contento.
In Puerto Rico, the commonwealth’s debt was cut by $60 billion. However, the Financial Oversight and Management Board (FOMB), tasked to enforce the dicta of the federal law, seems unable to tame the Puerto Rico Electric Power Authority (Prepa). The bankrupt utility, saddled with $9 billion in debt, was allowed to run amok for decades—pensions climbed to a whopping $39 million monthly and generation assets, and transmission and distribution (T&D) were allowed to fall into disrepair.
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