Puerto Rico Debt Crisis Update: Governor Padilla Supports Senate Bill, Journalists Sue For Hedge Fund Names

Senate Democrats put forward a bill on Wednesday that would allow many of Puerto Rico’s institutions to go access Chapter 9 bankruptcy, according to NBC News. Led by Senator Chuck Schumer (D-New York), they hope to get Republicans on board ahead of summer recess, according to Bloomberg. A similar bill was entangled in committee in the house in a debate over Puerto Rico statehood, after it was proposed by Puerto Rico’s nonvoting representative Pedro Pierluisi. Also on Wednesday, Federal Reserve chief Janet Yellen rejected the idea of relieving Puerto Rico, according to FP . Mired in debt, outmigration and fallen revenue, Puerto Rico is running out of options

Puerto Rico’s Governor, Alejandro García Padilla is personally lobbying members of congress in Washington. Last month, he delivered a speech calling on congress to allow for Chapter 9, saying that creditors and citizens would have to make sacrifices. In an interview with Telemundo, he made it clear that he’s willing to mobilize Puerto Ricans in Florida to make the debt bill a factor in the 2016 elections . On Wednesday, he released a statement welcoming the Senate bill.

"[...] I’m hopeful that the debate in Congress will propel this bill [....] Chapter 9 is an option that all states have at their disposal for their municipalities and public corporations and there is no reason why Puerto Rico, its creditors and its citizens should not be afforded the same protections. [It] would provide Puerto Rico and its 3.5 million U.S. citizens the essential legal framework that would allow us to adjust our debts in order to help generate economic growth and establish long-term fiscal stability.”

There is one big reason why Puerto Rico is not being afforded bankruptcy protections: most of Puerto Rico’s debt is owned by hedge funds who let money with the understanding that bankruptcy was not an option. Hypothetically, they might not have lent the money if they’d known that Puerto Rico could go bankrupt. Those companies are now scrambling to prevent suffering losses, CNBC reports .

Debt holders include companies who bought municipal bonds , as well as insurers and financiers of public companies like the power utility, PREPA. Some of those companies -- Fir Tree Partners, Centerbridge Partners, Davidson Kempner Capital Management, Stone Lion Capital Partners, Brigade Capital Management and Monarch Alternative Capital -- are negotiating with Puerto Rico on behalf of themselves and other unnamed companies. Even the known holders of Puerto Rico debt have been tight-lipped. But what about the unnamed companies?

To find out who those companies are, the Association of Puerto Rican Journalist filed a suit together with the Center for Investigative Journalists (CPI), aiming to force the government to release the names . Only then can they investigate so’called “vulture funds,” explained by CPI journalist Joel Cintrón Arbasetti.

“Just as a vulture is a bird of prey that feeds on dead flesh, a vulture fund is an investment firm with a similar taste: its main food source comes from countries in crisis, especially from public corporation debt. And those firms have already landed in Puerto Rico, after their journey through countries in economic ruin such as Argentina, Greece, and Spain.”