1 00:00:00,280 --> 00:00:03,640 Speaker 1: It amounts to the biggest municipal bankruptcy in US history, 2 00:00:03,880 --> 00:00:06,680 Speaker 1: and it's really not even close. Puerto Rico has filed 3 00:00:06,680 --> 00:00:10,000 Speaker 1: for protection from its creditors, seeking relief from about seventy 4 00:00:10,000 --> 00:00:14,160 Speaker 1: four billion dollars in debt that dwarfs Detroit's record setting 5 00:00:14,240 --> 00:00:18,239 Speaker 1: eighteen billion dollar bankruptcy. With us to discuss the new 6 00:00:18,280 --> 00:00:20,400 Speaker 1: filing and what it means for Puerto Rico is Bloomberg 7 00:00:20,480 --> 00:00:23,320 Speaker 1: News is resident expert on Puerto Rican debt Michelle Casky 8 00:00:23,400 --> 00:00:26,520 Speaker 1: in our New York student studio. Michelle, thanks for joining us. 9 00:00:26,840 --> 00:00:29,360 Speaker 1: UM just start by giving us the backdrop. Tell us 10 00:00:29,400 --> 00:00:32,200 Speaker 1: how we got to the point where Puerto Rico has 11 00:00:32,360 --> 00:00:34,600 Speaker 1: such a massive amount of debt that it can't pay 12 00:00:35,240 --> 00:00:38,040 Speaker 1: sure UM. Puerto Rico has been troubled for a while. 13 00:00:38,080 --> 00:00:41,240 Speaker 1: Their economy hasn't grown in a decade, and they have 14 00:00:41,280 --> 00:00:43,960 Speaker 1: a high unemployment rate. People are residents are leaving the 15 00:00:43,960 --> 00:00:47,040 Speaker 1: island for the US mainland to find work there. And 16 00:00:47,560 --> 00:00:50,199 Speaker 1: over the years, instead of they've they've had a lot 17 00:00:50,200 --> 00:00:54,120 Speaker 1: of overspending and so to fill budget holes they would 18 00:00:54,160 --> 00:00:57,960 Speaker 1: borrow money and UM they've acquired all the stebt. They've 19 00:00:58,000 --> 00:01:00,800 Speaker 1: racked up all the set and that's that's why we 20 00:01:00,840 --> 00:01:03,560 Speaker 1: are where we are now. So there's a law now 21 00:01:03,600 --> 00:01:06,360 Speaker 1: that allows them to go to court. Can you describe 22 00:01:06,400 --> 00:01:10,120 Speaker 1: for us what legally they're they're trying to do here? Yeah, 23 00:01:10,160 --> 00:01:14,119 Speaker 1: what they're trying to do is is reduced their debt. 24 00:01:14,280 --> 00:01:16,800 Speaker 1: Is to get their debt slashed in through court and 25 00:01:16,800 --> 00:01:21,479 Speaker 1: to get creditors to accept losses. And UM. Congress approved 26 00:01:21,600 --> 00:01:25,679 Speaker 1: this UM this process last year in a bill called 27 00:01:25,760 --> 00:01:28,840 Speaker 1: a law called pro Mesa, and it basically is a 28 00:01:28,880 --> 00:01:33,000 Speaker 1: way for Puerto Rico to declare bankruptcy. Michelle, is this 29 00:01:33,120 --> 00:01:36,759 Speaker 1: what lawmakers expected? What happened when they enacted this law? 30 00:01:36,800 --> 00:01:38,600 Speaker 1: I remember you and I spent a lot of time 31 00:01:38,600 --> 00:01:41,720 Speaker 1: working together before Congress passed that law. When there was 32 00:01:41,720 --> 00:01:45,000 Speaker 1: a Supreme Court case over Puerto Rico's effort to UH 33 00:01:45,560 --> 00:01:48,280 Speaker 1: file for bankruptcy under a local law and the Supreme 34 00:01:48,280 --> 00:01:51,320 Speaker 1: Court said that that they couldn't do that. Was this 35 00:01:51,400 --> 00:01:53,680 Speaker 1: looked at what was the point of the congressional law 36 00:01:53,680 --> 00:01:56,480 Speaker 1: if we would just end up in the same place. Well, 37 00:01:56,480 --> 00:01:59,000 Speaker 1: this does give them a more orderly process to work 38 00:01:59,000 --> 00:02:03,280 Speaker 1: out their debt instead of UM, there's multiply all these 39 00:02:03,320 --> 00:02:06,480 Speaker 1: different lawsuits that are going on. This helps put a 40 00:02:06,520 --> 00:02:10,320 Speaker 1: stay on those lawsuits, and uh, it gets all the 41 00:02:10,360 --> 00:02:14,800 Speaker 1: parties together in one court. One would think that, you know, 42 00:02:14,840 --> 00:02:17,120 Speaker 1: the fact that there's now a court process to do 43 00:02:17,160 --> 00:02:20,440 Speaker 1: this would have made a deal easier to reach for 44 00:02:20,440 --> 00:02:25,600 Speaker 1: Puerto Rico with its with its creditors. Why hasn't that happened, Well, 45 00:02:25,639 --> 00:02:29,600 Speaker 1: there's there's so many different creditors involved. Um, Puerto Rico 46 00:02:29,680 --> 00:02:33,280 Speaker 1: sold all different types of municipal debt and with through 47 00:02:33,320 --> 00:02:38,880 Speaker 1: different agencies, and they all have different repayment pledges and 48 00:02:38,880 --> 00:02:41,440 Speaker 1: and some of those repayment pledges and and and revenue 49 00:02:41,440 --> 00:02:44,560 Speaker 1: streams are competing against each other. So UM, to get 50 00:02:44,600 --> 00:02:46,919 Speaker 1: everybody all on the same board. And there's also a 51 00:02:47,040 --> 00:02:50,760 Speaker 1: bond ensures involved here, so to get everybody on the 52 00:02:50,760 --> 00:02:54,680 Speaker 1: same page as very difficult. So the governor's fiscal plan, 53 00:02:54,760 --> 00:02:58,400 Speaker 1: according to your your story, covers less than a quarter 54 00:02:58,560 --> 00:03:02,600 Speaker 1: of the debt payment due over the next decade. Is 55 00:03:02,600 --> 00:03:05,040 Speaker 1: that going to be the starting point for this this 56 00:03:05,120 --> 00:03:08,440 Speaker 1: court proceeding? I mean that that's sure. It doesn't seem like, uh, 57 00:03:08,480 --> 00:03:11,120 Speaker 1: you know, a very good return for the bondholders. Well 58 00:03:11,160 --> 00:03:14,280 Speaker 1: it's um, you know, it's something that the judge will 59 00:03:14,320 --> 00:03:17,040 Speaker 1: be looking at and and if they're if the parties 60 00:03:17,120 --> 00:03:19,840 Speaker 1: do UM agree to open that up and and to 61 00:03:19,919 --> 00:03:25,200 Speaker 1: negotiate those numbers and to change those numbers. Um, they can, UM. 62 00:03:25,840 --> 00:03:28,640 Speaker 1: But whether that's going to happen or not as remains 63 00:03:28,639 --> 00:03:31,200 Speaker 1: to be seen. Well, Michelle, how do we expect now 64 00:03:31,240 --> 00:03:32,960 Speaker 1: that Puerto Rico has gone to court? How do we 65 00:03:33,000 --> 00:03:36,680 Speaker 1: expect the fact that there are formal court proceedings in 66 00:03:36,720 --> 00:03:40,440 Speaker 1: place to affect the negotiations with the creditors? Well, the 67 00:03:40,520 --> 00:03:44,960 Speaker 1: governor today said that, UM, that Puerto Rico is still 68 00:03:45,200 --> 00:03:49,680 Speaker 1: negotiating with some creditors. UM. So apparently there are some 69 00:03:49,720 --> 00:03:53,800 Speaker 1: talks that are still ongoing. And UM, who knows, maybe 70 00:03:54,000 --> 00:03:58,360 Speaker 1: with this Title three filing, maybe that will UM, you know, 71 00:03:59,040 --> 00:04:02,960 Speaker 1: will that will allow the island to reach some agreements 72 00:04:03,000 --> 00:04:06,640 Speaker 1: with with maybe certain parties. UM, we'll see it. Tell 73 00:04:06,720 --> 00:04:08,320 Speaker 1: us a little about a little bit about who those 74 00:04:08,360 --> 00:04:10,800 Speaker 1: parties are. Who who are you know, there's there's some 75 00:04:10,920 --> 00:04:13,480 Speaker 1: hedge funds. I think we may have mentioned who else 76 00:04:13,560 --> 00:04:17,599 Speaker 1: holds this this debt that Puerto Rico's sure hedge funds definitely, 77 00:04:17,680 --> 00:04:19,680 Speaker 1: UM have been buying a lot of the debt in 78 00:04:19,680 --> 00:04:21,360 Speaker 1: the past. A couple of years or so, they hold 79 00:04:21,360 --> 00:04:25,359 Speaker 1: about one third of of the seventy billion of Puerto 80 00:04:25,400 --> 00:04:29,320 Speaker 1: Rico's bonded debt and UM there are still some uni 81 00:04:29,400 --> 00:04:32,120 Speaker 1: mutual funds that are still involved. That would be Oppenheimer 82 00:04:32,200 --> 00:04:35,960 Speaker 1: and Franklin, Templeton UM. And then there's there's another chunk 83 00:04:36,000 --> 00:04:39,520 Speaker 1: of the debt that's held on island from UM residents 84 00:04:39,520 --> 00:04:42,800 Speaker 1: on island and and UH Cooperative US, which are their 85 00:04:43,200 --> 00:04:46,159 Speaker 1: their credit local credit unions. That's roughly about fifteen billion 86 00:04:46,240 --> 00:04:50,560 Speaker 1: held on island. So, you know, having observed this for 87 00:04:50,600 --> 00:04:53,480 Speaker 1: a while, do you think that Puerto Rico filed really 88 00:04:53,480 --> 00:04:56,240 Speaker 1: expecting the court's going to have to do this for 89 00:04:56,320 --> 00:04:58,040 Speaker 1: them and and sort it all out. Or are they 90 00:04:58,080 --> 00:05:01,400 Speaker 1: really just trying to strong arm the creditors a bit here. No, 91 00:05:01,560 --> 00:05:04,520 Speaker 1: it sounds like they really want the help of the court. UM. 92 00:05:04,560 --> 00:05:07,960 Speaker 1: They want, you know, a judge to really look all 93 00:05:08,000 --> 00:05:11,560 Speaker 1: this over and and to help force the creditors to 94 00:05:11,560 --> 00:05:16,080 Speaker 1: take concessions. I want to thank Michelle Caski, Bloomberg News reporter, 95 00:05:16,480 --> 00:05:19,719 Speaker 1: for talking to us about UH this record setting filing 96 00:05:19,720 --> 00:05:22,760 Speaker 1: by Puerto Rico seeking relief from more than seventy billion 97 00:05:22,800 --> 00:05:25,120 Speaker 1: dollars in debts that will be a case we will 98 00:05:25,160 --> 00:05:25,679 Speaker 1: be following