Privatization Won’t Fix Puerto Rico’s Broken Power Utility
Lara Merling NACLA, February 1, 2018
Puerto Rico
Puerto Rico’s Power Utility Is Broken, but Privatization Won’t Necessarily Fix It
Months after Hurricane Maria the lights are still not back on for all Puerto Ricans. The extensive damage caused by the storm, along with the slow pace of restoring electricity have highlighted the struggles of Puerto Rico’s Electric Power Authority (PREP
GoldenTree: An Optimistic Vulture Circling Puerto Rico
Last month, a joint investigation by In These Times and the Puerto Rico-based Centro de Periodismo Investigativo revealed the top 10 holders of Puerto Rico’s $74.8 billion debt. The authors write:
The popular narrative of Puerto Rico’s debt holders is that they are “small” individual bondholders—rookie investors who trusted their savings to financial firms. But our investigation reveals that some of the most aggressive players demanding debt repayment in Puerto Rico’s bankruptcy court are so-called “vulture firms.” These hedge funds specialize in high-risk “troubled assets” near default or bankruptcy and cater to millionaire and billionaire investors.
While these bondholders are tied up in court with Puerto Rico and the congressionally mandated Oversight Board, the situation on the ground remains grim after the devastation caused by Hurricanes Irma and Maria. Storm-related damages are estimated to be as high as $95 billion.
If Puerto Rico was unable to pay its debt before the storms, it’s virtually impossible now. But that hasn’t stopped at least one vulture, GoldenTree Asset Management, from doubling down on its Puerto Rico bet.
Number five on the In These Times/Centro de Periodismo Investigativo list, GoldenTree reportedly held $587,253,141 worth of Puerto Rican COFINA bonds (bonds backed by income from Puerto Rico’s sales tax). That figure was based on a court filing from mid-August. On October 26, however, bondholders were required to again disclose their financial interests. That filing showed GoldenTree holding assets valued at $852,578,549, meaning that in the last two months, GoldenTree has acquired an additional $250 million in Puerto Rican bonds.
This is classic vulture behavior ? and exactly why many are now arguing for urgent and significant debt relief for the struggling island.
It’s impossible to know exactly when or at what cost GoldenTree acquired those additional bonds ? a spokesperson for GoldenTree declined to answer questions on the timing or cost of the purchases. But even before the hurricanes, COFINA bonds were trading at significantly less than face value. After Hurricane Maria, with Puerto Rico’s inability to pay becoming more obvious, prices have plummeted even further. Given that, and based on where some COFINA bonds are currently trading, it appears unlikely GoldenTree would have paid more than 20 cents on the dollar. At that price, if GoldenTree were repaid in full just on these recent acquisitions it would stand to make a tidy 400 percent profit.
Puerto Rico’s Dual Crises Show Its Territorial Status is the Worst of Both Worlds
Dan BeetonInsideSources, October 22, 2017
Congress: Remember Puerto Rico Needs Fair Medicaid Funding Too
Lara MerlingThe Hill, October 17, 2017
Puerto Rico’s Debt Stands in the Way of Recovery from Hurricanes and Austerity
Jake Johnston
MarketWatch, October 5, 2017
More Trouble Ahead: Puerto Rico’s Impending Medicaid Crisis
October 2017, Lara Merling and Jake Johnston
Puerto Rico Needs More Hurricane Relief Now ? and a New Deal with Debt Relief
Mark WeisbrotBuzzFeed News, September 30, 2017
Strangling Puerto Rico in Order to Save It
Mark WeisbrotThe New York Times, August 17, 2017
Puerto Rico’s Oversight Board: The Grinch who Stole Christmas and Came Back for More
As Puerto Rico’s debt saga plays out in court, its Financial Oversight and Management Board continues to push for further austerity measures that directly impact the people of Puerto Rico. In an effort to comply with the demands of the board, the Puerto R