1 00:00:03,240 --> 00:00:06,640 Speaker 1: Global business news twenty four hours a day at Bloomberg 2 00:00:06,680 --> 00:00:09,760 Speaker 1: dot com, the radio, plus Globo lact and on your radio. 3 00:00:10,000 --> 00:00:14,120 Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Headquarters 4 00:00:14,160 --> 00:00:16,759 Speaker 1: on Catherine, Calgary, Bloomberg. Taking Stock is brought to you 5 00:00:16,800 --> 00:00:19,600 Speaker 1: by Sector Spider e t S. Why by a single 6 00:00:19,640 --> 00:00:22,400 Speaker 1: stock when you can invest in the entire sector? Visit 7 00:00:22,440 --> 00:00:25,360 Speaker 1: Sector spdrs dot com or call one eight six six 8 00:00:25,440 --> 00:00:28,640 Speaker 1: Sector et F. The SMP five hundred wrapped up its 9 00:00:28,640 --> 00:00:31,600 Speaker 1: worst two day drops in February. Stocks fell a mid 10 00:00:31,720 --> 00:00:34,840 Speaker 1: lackluster earnings and few signs of a pickup and economic growth. 11 00:00:35,120 --> 00:00:37,640 Speaker 1: Equities rebounded in the final hour of trading, with the 12 00:00:37,800 --> 00:00:40,960 Speaker 1: SMP cutting its worst losses by more than half. Apple 13 00:00:41,040 --> 00:00:43,840 Speaker 1: declined for a seventh session, a day after Carlam said 14 00:00:43,880 --> 00:00:46,479 Speaker 1: he cashed out his stake in the company. We talk 15 00:00:46,560 --> 00:00:49,160 Speaker 1: to market SAVY fifteen minutes throughout the trading day down 16 00:00:49,200 --> 00:00:52,560 Speaker 1: destro Allege fell fifty seven points at three to close 17 00:00:52,600 --> 00:00:55,360 Speaker 1: out the week at seventeen thousand, seven hundred seventy three, 18 00:00:55,880 --> 00:00:58,040 Speaker 1: SMP five hundred, down ten and a half points, the 19 00:00:58,120 --> 00:01:00,880 Speaker 1: loss of half a percent to close at two sixty five. 20 00:01:01,280 --> 00:01:03,280 Speaker 1: Then as I fell thirty points two thirds of a 21 00:01:03,320 --> 00:01:07,040 Speaker 1: percent inclosed at forty seven seventy five. West Texas Intermediate 22 00:01:07,080 --> 00:01:10,640 Speaker 1: crude oil down eight cents of barrel to spot, gold 23 00:01:10,760 --> 00:01:13,800 Speaker 1: up thirty cents an ounce to twelve ninety and the 24 00:01:13,840 --> 00:01:16,040 Speaker 1: tenure treasury down to thirty seconds with the yield of 25 00:01:16,080 --> 00:01:19,440 Speaker 1: one point eight three percent. And that's a Bloomberg Business flash. 26 00:01:21,000 --> 00:01:23,959 Speaker 1: You're listening to Taking Stock with Kathleen Hayes and Pin 27 00:01:24,080 --> 00:01:30,160 Speaker 1: Fox on Bloomberg Radio. Puerto Rican Governor Alejandro Garcia Padilla 28 00:01:30,280 --> 00:01:32,560 Speaker 1: has said this week that there will be at default 29 00:01:32,760 --> 00:01:36,600 Speaker 1: on Monday. He added that I don't think there is 30 00:01:36,640 --> 00:01:40,480 Speaker 1: a deal on the table that avoids a default, So 31 00:01:40,520 --> 00:01:43,600 Speaker 1: what will happen. That's why we have Brian Chappatta in 32 00:01:43,720 --> 00:01:47,720 Speaker 1: his municipal bond reporter for Bloomberg News. You can follow 33 00:01:47,800 --> 00:01:52,080 Speaker 1: him on Twitter at be Chapatta. Brian, welcome to the studio, 34 00:01:52,080 --> 00:01:53,800 Speaker 1: Thanks for coming in, Thanks for having me. All right, 35 00:01:53,800 --> 00:01:57,200 Speaker 1: you got you, Christo, Paul, Oh, it's an easy it's 36 00:01:57,240 --> 00:01:59,480 Speaker 1: an easy called. I mean, the governor said that Puerto 37 00:01:59,560 --> 00:02:01,760 Speaker 1: Rico is gonna default. They are going to default. It's 38 00:02:01,800 --> 00:02:04,280 Speaker 1: just sort of a matter of how they're going to default. 39 00:02:04,680 --> 00:02:06,760 Speaker 1: The idea how they're going to default, what the fallout 40 00:02:06,840 --> 00:02:09,920 Speaker 1: is going to be from the default, like a well, 41 00:02:09,919 --> 00:02:13,160 Speaker 1: the governor has the debt moratorium that he passed earlier 42 00:02:13,160 --> 00:02:16,280 Speaker 1: this month at his disposal. That law allows him to 43 00:02:16,840 --> 00:02:21,320 Speaker 1: just say we're not paying anymore effective immediately, so that's 44 00:02:21,360 --> 00:02:23,800 Speaker 1: one route that they can take. There have been talks 45 00:02:23,880 --> 00:02:27,960 Speaker 1: between creditors and the Government Development Bank in terms of 46 00:02:28,200 --> 00:02:31,000 Speaker 1: a forbearance agreement or doing something in order to put 47 00:02:31,000 --> 00:02:34,840 Speaker 1: off payments. Um, there's been no formal announcement yet that 48 00:02:34,840 --> 00:02:37,920 Speaker 1: those have materialized and they've gotten agreements in place. But 49 00:02:38,080 --> 00:02:41,120 Speaker 1: even if they have an agreement for a forbearance with creditors, 50 00:02:41,680 --> 00:02:44,720 Speaker 1: the credit rating agencies still say this is a default 51 00:02:44,760 --> 00:02:47,400 Speaker 1: because you're not making your full payment on time. Just 52 00:02:47,520 --> 00:02:53,160 Speaker 1: to give detail to the numbers the creditors, seventy billion 53 00:02:53,200 --> 00:02:56,959 Speaker 1: dollars that's the debt that that's the full debt. Four 54 00:02:57,200 --> 00:03:00,120 Speaker 1: d and twenty two million is what was supp is 55 00:03:00,160 --> 00:03:02,080 Speaker 1: to be paid on Monday, that's right, and that's on 56 00:03:02,120 --> 00:03:06,120 Speaker 1: the Government Development Banks bonds. It's the fourth largest issuer 57 00:03:06,160 --> 00:03:09,440 Speaker 1: of bonds on the island, with a little over seven 58 00:03:09,480 --> 00:03:12,280 Speaker 1: billion dollars of bonds out there. So it would be 59 00:03:12,360 --> 00:03:15,359 Speaker 1: in terms of the size of an issuer, it will 60 00:03:15,360 --> 00:03:17,959 Speaker 1: be the largest Puerto Rico issuer to default so far. 61 00:03:18,040 --> 00:03:21,880 Speaker 1: So far they've been relatively small authorities. Is there any 62 00:03:22,080 --> 00:03:25,600 Speaker 1: update from the US Congress such as how Speaker Paul Ryan, 63 00:03:25,639 --> 00:03:27,880 Speaker 1: I mean, this has been going on for three months. 64 00:03:27,880 --> 00:03:30,200 Speaker 1: In fact, he asked them to put together what he 65 00:03:30,320 --> 00:03:34,480 Speaker 1: called a responsible solution. Have the Democrats and the Republicans 66 00:03:34,520 --> 00:03:36,720 Speaker 1: gotten together on this? Uh? They have a little bit 67 00:03:36,760 --> 00:03:40,760 Speaker 1: there in recess right now, so nothing's gonna materialize until 68 00:03:40,840 --> 00:03:43,520 Speaker 1: at least after May tenth, and there's a lot of 69 00:03:43,520 --> 00:03:45,880 Speaker 1: talk that nothing might get done until they're backed up 70 00:03:45,880 --> 00:03:49,680 Speaker 1: against another deadline, which would be July one. UM. There's 71 00:03:49,880 --> 00:03:53,720 Speaker 1: also been conversations from Bishop who uh is spearheading this 72 00:03:54,160 --> 00:03:58,000 Speaker 1: UH in Congress, saying that we're not that far apart um. 73 00:03:58,120 --> 00:04:00,640 Speaker 1: There's just some small changes that need to be worked on. 74 00:04:00,800 --> 00:04:03,839 Speaker 1: But it does seem like you know, you mentioned Paul Ryan, 75 00:04:03,920 --> 00:04:06,200 Speaker 1: he's put a lot of political capital into this to 76 00:04:06,320 --> 00:04:08,440 Speaker 1: making sure it gets done. So between him and Pelosi, 77 00:04:08,480 --> 00:04:10,280 Speaker 1: it seems like they are going to try to reach 78 00:04:10,360 --> 00:04:13,280 Speaker 1: some sort of solution, but it won't be enough to 79 00:04:13,440 --> 00:04:16,120 Speaker 1: stop this May first default will it be enough to 80 00:04:16,200 --> 00:04:18,800 Speaker 1: stop at the fault on July the first, because I 81 00:04:18,880 --> 00:04:22,880 Speaker 1: understand that Puerto Rico owes two billion dollars then, and 82 00:04:23,040 --> 00:04:25,480 Speaker 1: not just two billion dollars, but it's a lot of 83 00:04:25,600 --> 00:04:28,720 Speaker 1: payments on their general obligation bonds, which are supposed to 84 00:04:28,760 --> 00:04:32,960 Speaker 1: be Sacker saying to guaranteed under the Commonwealth Constitution. That's right, 85 00:04:33,000 --> 00:04:36,200 Speaker 1: So that's gonna be the real interesting date. Um. This 86 00:04:36,240 --> 00:04:38,680 Speaker 1: one has been telegraphed for a little while. I mean 87 00:04:38,760 --> 00:04:41,680 Speaker 1: the governor said even back in December, we're gonna miss 88 00:04:41,680 --> 00:04:44,599 Speaker 1: payments neither January or May. So he was sort of 89 00:04:44,600 --> 00:04:47,880 Speaker 1: telegraphing this for a while. But uh yeah, the general 90 00:04:47,880 --> 00:04:52,040 Speaker 1: obligation bonds, as you say, a Commonwealth guaranteed. Uh So, 91 00:04:52,200 --> 00:04:55,160 Speaker 1: missing those would definitely open up a new can of 92 00:04:55,200 --> 00:04:59,239 Speaker 1: worms for everyone involved. You have to open up that constitution. 93 00:04:59,600 --> 00:05:03,000 Speaker 1: At this same time, Puerto Rico's economy is struggling. They 94 00:05:03,040 --> 00:05:06,040 Speaker 1: are now dealing with an outbreak, or at least a 95 00:05:06,080 --> 00:05:09,159 Speaker 1: potential outbreak, I should say, of the Zeka virus, and 96 00:05:09,200 --> 00:05:11,960 Speaker 1: the governor has come on and said, there's no way 97 00:05:12,000 --> 00:05:15,640 Speaker 1: that we can pay for eliminating these stagnant pools of 98 00:05:15,680 --> 00:05:19,320 Speaker 1: water Uh, where the mosquitoes thrive. Yeah, I believe the 99 00:05:19,360 --> 00:05:22,640 Speaker 1: first confirmed death from the ZEKEA virus was announced today 100 00:05:22,640 --> 00:05:26,320 Speaker 1: in Puerto Rico. So that's a real sad situation. Um. 101 00:05:26,800 --> 00:05:30,520 Speaker 1: The tourism industry was doing well in Puerto Rico and 102 00:05:30,560 --> 00:05:34,279 Speaker 1: there's a possibility that this outbreak might hurt the one 103 00:05:34,400 --> 00:05:37,640 Speaker 1: area of the economy that was actually growing and sort 104 00:05:37,680 --> 00:05:41,040 Speaker 1: of doing well. So, uh, it's a pretty unfortunate situation. Yeah. 105 00:05:41,120 --> 00:05:43,320 Speaker 1: I mean Governor Ali hud Garcia Perdia has said for 106 00:05:43,360 --> 00:05:45,400 Speaker 1: a long time, we have to pay for essential services, 107 00:05:45,640 --> 00:05:48,880 Speaker 1: and he's really you know, made this contrast between paying 108 00:05:48,920 --> 00:05:51,240 Speaker 1: debt or making sure that the residents have a quality 109 00:05:51,279 --> 00:05:55,080 Speaker 1: of life. And the residents of a commonwealth of Puerto 110 00:05:55,200 --> 00:05:58,919 Speaker 1: Rico are leaving right. The actual population is shrinking that 111 00:05:59,000 --> 00:06:02,000 Speaker 1: I mean, that's the biggest problem. And the argument that 112 00:06:02,160 --> 00:06:07,280 Speaker 1: the governor and his aids are making two bondholders is, look, 113 00:06:07,520 --> 00:06:10,240 Speaker 1: the longer you drag this out, the less you know, 114 00:06:10,560 --> 00:06:12,960 Speaker 1: share of a pie you're gonna have, because the pie 115 00:06:13,000 --> 00:06:16,919 Speaker 1: is shrinking. There's fewer people on the island. Uh. The 116 00:06:16,960 --> 00:06:20,240 Speaker 1: economy is continuing to contract. Um, So yeah, you have 117 00:06:20,279 --> 00:06:24,279 Speaker 1: this economy that's stagnant and actually declining again. Uh. And 118 00:06:24,320 --> 00:06:27,840 Speaker 1: the population uh out migration is is a huge part 119 00:06:27,920 --> 00:06:29,719 Speaker 1: of that. So they're saying, we need to get something 120 00:06:29,760 --> 00:06:32,400 Speaker 1: done now so we can turn our economy around and 121 00:06:32,440 --> 00:06:34,760 Speaker 1: you guys can get paid the most that we can 122 00:06:34,800 --> 00:06:37,600 Speaker 1: afford at this time. So it's like three things. Right. 123 00:06:37,640 --> 00:06:41,760 Speaker 1: You've got the government that has overspent or spent, according 124 00:06:41,760 --> 00:06:45,600 Speaker 1: to some irresponsibly for a long time. Uh. If they 125 00:06:45,640 --> 00:06:49,240 Speaker 1: failed to pass a balanced budget right, which is a 126 00:06:49,320 --> 00:06:53,599 Speaker 1: constitutional requirement, and the g d P hasn't gone anywhere 127 00:06:53,600 --> 00:06:56,960 Speaker 1: since two thousand five. It's it's a real problem. And 128 00:06:57,000 --> 00:06:59,799 Speaker 1: that's why Congress uh sort of has to get involved. 129 00:06:59,800 --> 00:07:02,920 Speaker 1: The governor said today pretty much that the ball is 130 00:07:02,960 --> 00:07:05,640 Speaker 1: in Congress is court now. We need them to do something. 131 00:07:06,040 --> 00:07:09,240 Speaker 1: There is a Recovery Act in front of the U. S. 132 00:07:09,240 --> 00:07:12,600 Speaker 1: Supreme Court which could get passed, but the idea right 133 00:07:12,640 --> 00:07:16,400 Speaker 1: now is mostly eyes on Congress in Washington and see 134 00:07:16,640 --> 00:07:18,600 Speaker 1: see what they can come up with a fistal control 135 00:07:18,640 --> 00:07:20,760 Speaker 1: board that might be able to implement some more control 136 00:07:21,320 --> 00:07:24,680 Speaker 1: on government spending. You're gonna have a very busy weekend 137 00:07:24,680 --> 00:07:27,520 Speaker 1: and a busy couple of months. Brian Schappetta, Thank you 138 00:07:27,600 --> 00:07:31,480 Speaker 1: very much. Municipal bond reporter from Bloomberg can follow him 139 00:07:31,480 --> 00:07:35,200 Speaker 1: on Twitter at b Chappetta. All about Puerto Rico and 140 00:07:35,200 --> 00:07:38,360 Speaker 1: their debt problems. Our thanks to Reggie Basil, our engineer, 141 00:07:38,480 --> 00:07:42,160 Speaker 1: producer Sam Lnga. I'm Pim Fox and this is Bloomberg Radio. 142 00:07:46,320 --> 00:07:50,880 Speaker 1: Coming up on Bloomberg Law, discussion of the Trade Secrets Act. 143 00:07:51,240 --> 00:07:54,520 Speaker 1: We'll find out about this intellectual property law. It's been 144 00:07:54,560 --> 00:07:59,080 Speaker 1: on the book since it's coming up next on Bloomberg Radio.