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Speaker 1: on taking Stock, a story about Puerto Rico. U S
Speaker 1: Treasury Secretary Jacob Blue warning that Puerto Rico may need
Speaker 1: a US government bailout if the Congress doesn't pass a
Speaker 1: bill that helps the island restructure its debts and prevent
Speaker 1: a series of cascading defaults. Will investigate right now. Let's
Speaker 1: go to Catherine Calgary in the Bloomberg newsroom for a
Speaker 1: Bloomberg business flash. Thank you, PIM and Bloomberg. Taking Stock
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Speaker 1: one six six Sector e t S. The stock market
Speaker 1: is clowing back some of the owned at lost last week.
Speaker 1: The benchmarks are advancing, helped by gains in banks and
Speaker 1: consumer discretionary companies. Traders have lowered their expectations for higher
Speaker 1: interest rates in June after data showing a manufacturing flow
Speaker 1: last month. Investors are awaiting the government's monthly jobs report
Speaker 1: this Friday. Drew Maddis, chief economists at UBS, and his
Speaker 1: expectations for the April employment report well, probably get two hundred,
Speaker 1: and we'll see the unplant rate drop, and perhaps more importantly,
Speaker 1: we should see some wage gains. Uh and I think
Speaker 1: that combination will be quite favorable. We check the markets
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Speaker 1: Down Industrial average is up one nine points six cents
Speaker 1: of a percent, trading at seventeen thousand, eight hundred eighty
Speaker 1: two S and P five hundred, up fifteen points seven
Speaker 1: tenths of a percent of two thousand, seventy nine. The
Speaker 1: NASTAC is higher by thirty eight points eight tenths of
Speaker 1: a percent, trading at forty eight thirteen West Texas. In
Speaker 1: the media, crude oil down a dollar five of barrel
Speaker 1: two point three percent to forty four eighty seven. Spout
Speaker 1: gold is up two dollars, announced at twelve ninety two
Speaker 1: fifty ten. Your Treasury downs seven thirty seconds with the
Speaker 1: yield of one point eight five percent. Among today's top
Speaker 1: business stories, construction spending increased in March to its highest
Speaker 1: level in more than eight years. Gains in home building
Speaker 1: a non residential construction offset a drop in government projects.
Speaker 1: American Express is set spending more money to attract cardholders.
Speaker 1: That's the word from Chief executive Ken Shinal. He said.
Speaker 1: AMEX is actively seeking retail partners as it works with
Speaker 1: a great sense of urgency to improve its results. Valiant
Speaker 1: Pharmaceuticals International was retreating again today, down as much as
Speaker 1: after billionaire Warren Buffett criticized the drug maker strategy at
Speaker 1: the annual meeting of his company, Berkshire. Half Away and
Speaker 1: now let's get an update of some of the other
Speaker 1: stories were following on Bloomberg Radio today. Catherine, thank you
Speaker 1: from the Bloomberg news Room. I'm Mark Crumpton. This news
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Speaker 1: It was a day off for most kids in Detroit's
Speaker 1: public school system. The Teachers Union encouraged members to call
Speaker 1: in sick as a protest of funding issues at the
Speaker 1: financially struggling district. Kimberly Love is a teacher at Detroit's
Speaker 1: Class Tech High School. We have acted in good faith
Speaker 1: as educators, and now it's time for was to really
Speaker 1: stand strong in solidarity to send a message to district
Speaker 1: officials into the state that is enough. In March, emergency
Speaker 1: funding was made available to keep the Detroit Public School
Speaker 1: District operating through the end of the school year. Secretary
Speaker 1: of State John Kerry wants Russia to help broker a
Speaker 1: nationwide ceasefire in Syria. He spoke to reporters as he
Speaker 1: arrived in Geneva to start another round of peace talks.
Speaker 1: We are talking directly with the Russians even now. The
Speaker 1: hope is that progress. Last week, dozens of people were
Speaker 1: killed in the city of Aleppo when Syrian playing is attacked.
Speaker 1: Governor Chris Christie has rejected legislation tightening requirements that new
Speaker 1: Jersey employers pay workers doing the same job equally regardless
Speaker 1: of gender. Governor Christie conditionally vetoed the measure today, saying
Speaker 1: state law already banned gender based pay discrimination. Global News
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Speaker 1: hundred journalists in more than one hundred fifty news bureaus
Speaker 1: around the world. From the Bloomberg Newsroom, I'm Mark Crumpton. Catherine,
Speaker 1: thank you, And now let's get an update of those
Speaker 1: equity benchmarks. Down. Industrial average up one hundred six points
Speaker 1: at seventeen thousand, eight hundred eighty s and t f
Speaker 1: I founded up fourteen points at two thousand seventy nine.
Speaker 1: The nastack is up thirty eight points at thirteen. And
Speaker 1: that's a Bloomberg Business flash. You're listening to Taking Stock
Speaker 1: with Kathleen Hayes and Pim Fox on Bloomberg Radio. The
Speaker 1: Governor of the Commonwealth of Puerto Rico, Alejandro Garcia Pattillo,
Speaker 1: warned that port Rico bond investors will face a cascade
Speaker 1: of the faults beginning in July unless the US Congress
Speaker 1: passes legislation that would facilitate a restructuring of the commonwealth's debt. Well,
Speaker 1: how likely is that. Let's find out from David Towell.
Speaker 1: He is the president and the co founder of Magnun Capital. David,
Speaker 1: thank you very much. For being with us. So give
Speaker 1: us an update and and any prognosis you can for
Speaker 1: this patient that at least today is not paying four
Speaker 1: two million dollars from the Government Development Bank on interest
Speaker 1: that is due. Uh. So this is just another i'd say,
Speaker 1: data point on the timeline here for Puerto Rico. UM
Speaker 1: it is seemingly a point in time that the Congress
Speaker 1: didn't particularly think was so significant. The real um point
Speaker 1: in time that is at this point absolutely critical is
Speaker 1: a July one date where roughly two billion dollars of
Speaker 1: total payments are due, and more importantly of those payments,
Speaker 1: uh it will be potentially the first payment on general
Speaker 1: obligations bonds that the Commonwealth could code to default on.
Speaker 1: Why is it so critical to understand the value or
Speaker 1: the difference of a general obligation bond and let's say
Speaker 1: something from the Commonwealth Development Bank. Oh sure. So, as
Speaker 1: with the even corporate capital structures, their varying priorities on
Speaker 1: debt UM and when it comes to a Commonwealth like
Speaker 1: this one, UM, some bonds or some uh debt is
Speaker 1: guaranteed by certain revenue streams. In the case of general
Speaker 1: obligations bonds, they're actually guaranteed by the Constitutional Puerto Rico.
Speaker 1: Exactly what that means to the extent that they were
Speaker 1: default on that and exactly who would be able or
Speaker 1: which classes of bondholders would be entitled to which revenue
Speaker 1: streams that the commonwealth produces is actually a question that
Speaker 1: hasn't been an sard uh. And so therefore, you know,
Speaker 1: missing a payment on those geo's in July would actually
Speaker 1: bring the legal issue to a head um and make
Speaker 1: you know, play out very disastrously uh for the commonwealth itself.
Speaker 1: Forget about the bond holders for a second. Uh. You know,
Speaker 1: the commonwealth itself is under severe or financial stress right now,
Speaker 1: and the citizens of the island you know, need to
Speaker 1: get uh you know necessary uh, infrastructure necessary uh and
Speaker 1: basic you know services provided um, and that will further
Speaker 1: come under strain, you know, to the extent of the
Speaker 1: July first payment is well, just to highlight what you said,
Speaker 1: Governor Padilla, he said that he's going to be focusing
Speaker 1: on providing essential services rather than pay creditors. This is
Speaker 1: so far the biggest to fall. I guess you get
Speaker 1: attention when it's a billion dollars of a misspayment rather
Speaker 1: than just FO two million it's not only that, uh,
Speaker 1: you know, today's bonds um, you know don't allow the
Speaker 1: creditors uh necessarily to bring the Commonwealth to a halt
Speaker 1: uh the missed g O payment however, um, you know,
Speaker 1: if interpreted favorably for those general obligation bondholders, could actually
Speaker 1: disallow PADA from redirecting funds. Uh if the geos are
Speaker 1: successful in a litigation which says under the Commonwealth Constitution
Speaker 1: that they must be paid well. Frankly, general obligation bondholders
Speaker 1: may have an entitlement that could be very much higher
Speaker 1: than you know, the necessary infrastructure of the Commonwealth, or
Speaker 1: at least, you know, anything beyond the absolutely most bare
Speaker 1: bones basic needs of the Commonwealth. What about forty seven
Speaker 1: cents on the dollar? This, I understand is the agreement
Speaker 1: or the basis for an agreement by the government Development
Speaker 1: which defaulted today and some of their hedge funds bond holders. Yeah,
Speaker 1: there was a news report of regarding that regarding a
Speaker 1: certain group of bondholders comprising less than of the total
Speaker 1: outstanding bonds UM. And it also says that nothing is
Speaker 1: definite and that they would use the next thirty days,
Speaker 1: you know, to further discuss and they could obviously, you know,
Speaker 1: in order to complete restructuring of those GDB bonds, they'd
Speaker 1: need buy in from the remaining seventy plus percent who
Speaker 1: are not currently you know, part of that tentative agreement. Um,
Speaker 1: it's all well and good, but unfortunately we've we've seen
Speaker 1: a lot of this in this situation until this point,
Speaker 1: which is discussions and you know, tentative agreements and understandings
Speaker 1: around frameworks or you know, proposals being put forward and
Speaker 1: that hasn't gotten the Commonwealth anywhere. And at this time,
Speaker 1: you know, they're running on borrowed time. Uh, there really
Speaker 1: isn't time left to go ahead and have discussions with
Speaker 1: a minority of bondholders in the hope that a consensus
Speaker 1: will be reached. Obviously, there's always the possibility that a
Speaker 1: broad restructuring could go ahead and be reached and you know,
Speaker 1: everything will get sewn up pretty quickly. However, you know,
Speaker 1: history has shown, especially in this case, which is much
Speaker 1: more than a three ringed circus in wheer go ahead
Speaker 1: and orchestrate, that it's quite difficult. And so the likely um,
Speaker 1: you know, possibility is going to be that the Congress
Speaker 1: is either going to have to come together with respect
Speaker 1: to some sort of law that is going to be
Speaker 1: imposed on the island, or that we're going to get
Speaker 1: to a messy default here in July. Thank you very much.
Speaker 1: David's how president co founder Magdalen Capital speaking about Puerto
Speaker 1: Rico and it's a debt crisis. If you're listening to
Speaker 1: taking Stock on Bloomberg Radio, coming up on taking Stock,
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