Puerto Rico Doesn’t Want Reform The Promesa law, not Hurricane Maria, is the real culprit behind the island’s troubles.By Mary Anastasia O’Grady
https://www.wsj.com/articles/puerto-rico-doesnt-want-reform-1511730516
It has been 10 weeks since Hurricane Maria slammed into Puerto Rico. The devastation was fierce. Yet it cannot explain why almost half the generating capacity of the Puerto Rico Electric Power Authority (Prepa) is still down.
Credit for that goes to Congress, which in June 2016 passed the Puerto Rico Oversight Management and Economic Stability Act, a k a Promesa. It opened the door to debt defaults that violate the Puerto Rican constitution and U.S. law. As is always the case when the rule of law takes a back seat to politics, it has fueled chaos.
Prepa blames its disastrous post-hurricane decisions on a shortage of cash. Yet in the immediate aftermath of the storm, a group of Prepa bondholders offered the company fresh debtor-in-possession financing that included a swap of $1 billion in existing debt for $850 million in new bonds and $1 billion in new cash.
Puerto Rico rejected the offer. “The bondholders’ proposal is not viable and would severely hamper and limit Prepa’s capacity to successfully manage its recovery,” Puerto Rico’s Fiscal Agency and Financial Advisory Authority said at the time. It added that the offer had the “appearance” of “being made for the purpose of favorably impacting the trading price of existing debt.” Heaven forbid.
More unthinkable was ruining the “flat broke” image the commonwealth has been cultivating so it can write down debt and skip the matching requirements necessary to receive Federal Emergency Management Agency funds. It’s also more convenient to tap taxpayers than to borrow money from private entities asking for accountability. This is particularly true for a state-owned monopoly like Prepa, which is as much a political instrument as it is an electricity company. CONTINUE AT SITE
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