in Puerto Rico, one month after it was devastated by Hurricane Maria and, before that, Hurricane Irma. Four out of five Puerto Ricans are still without electricity, and food and water remain in short supply. Puerto Rico’s Governor Ricardo Rosselló has set a goal of re-establishing electricity to 30 percent of the island by the end of this month. Meanwhile, on Monday, the island’s Secretary of State Luis Rivera Marín posted a shocking video of himself standing in a large dumpster, where he claimed to have found food and water that had been discarded instead of distributed.
the island’s $74 billion debt that’s owed to bondholders as it faces an estimated $95 billion in storm-related damage. Reporters at the Center for Investigative Journalism in Puerto Rico and In These Times in the United States spent five months digging through court filings and documents from financial firms and much more in order to put together the most up-to-date list of 10 of the largest financial firms that are now scrambling to get billions of dollars out of the bankrupt island as it tries to rebuild.
More than 30 known financial firms are vying for Puerto Rico’s debt repayments, of which at least 24 are so-called vulture funds, that specialize in high-risk assets and cater to wealthy investors. Several of the funds were complicit in past financial crises in other parts of the world, including in Argentina and Greece, as well as during the 2008 financial collapse in the United States.
Jessica Stites talking:
we teamed up with the Center for Investigative Journalism in Puerto Rico, which has been doing amazing work for years looking into this debt crisis. And what we wanted to know was who are the current owners of the debt. And you’d think that would be an easy question, because the owners of the debt are in court fighting with the government of Puerto Rico, trying to get the money back. But actually, this is an incredibly secretive process. A lot of this happens behind closed doors, and it’s not at all public who is involved in these negotiations. So what the center did was comb through these bankruptcy documents that have been filed in court since May, and pull out the names of these bondholders and creditors that are trying to get their payments.
And we were actually surprised by what we found. We have heard a lot of names floated in relation to the Puerto Rican debt crisis, a lot of big firms. We know at some point Goldman Sachs has been involved, Merrill Lynch has been involved. But the firms that are most active in bankruptcy court right now, we found, were what are called vulture firms. And as Juan mentioned, these are firms—these are hedge funds, and they specialize in high-risk assets, so troubled assets. So they’re going into places where there’s a risk of a default, a risk of a bankruptcy, and they’re buying up this stuff and selling it to investors who tend to be very high-net-worth people. We are looking at investment thresholds of a million to 5 million dollars to even buy into these firms. And although, you know, there are a lot of debt holders, this is who we’re seeing really kind of fighting tooth and nail in court to try to get this money back.
Puerto Rico is part of the United States. It’s governed by the same public records law. And the government basically told them, “No, we’re not going to give you this information.” They cited privacy of the creditors. And so, the center had to go to court and sue for it, and it took months. And so they finally got the names of the people who had bought this initial 2014 junk bond emission. But at the point they got them, in 2015, you know, that information was already becoming old, because this debt continues to change hands. So getting up-to-date names and debt amounts has been incredibly difficult.
Carla Minet talking:
for us, we’ve been investigating this issue for the past three years, at least, so most of them are not new names. But in some cases, like Decagon Holdings, whose parent company is The Baupost Group, we just knew about their owners just recently, because a journalist went on looking for directions, different kind of anonymous directions, and finally got to an address where they found the owner of the firm. So, some of them have been anonymous for some time.
there will be a month, this Friday, since Maria came into Puerto Rico. We have to remember, we first saw Irma, hurricane, also. And, you know, these four weeks have been like hell for everyone in Puerto Rico. We are still very stranded. There’s electricity for only less than 20 percent of the population, and water for around 30 percent or so. We really have very difficult communications using cellular phones in Puerto Rico. You can do it only mostly in San Juan, the capital. And, you know, mostly people are without food, without water, especially in the mountainous region of the island. They lost their homes. They have no roofs. FEMA help has been very, very slow in Puerto Rico. And, you know, we’re still even clearing the roads in some places.
some of the bondholders have different kinds of bonds. Puerto Rico, you know, has 18 different kinds of bonds. So, in some cases, there are definitely conflicts, even inside some of the firms that own different kinds of those bonds. And some have priority. Some are constitutionally emitted, but some of them are not. So, there are lots of criteria that anyone deciding who’s going to be paid will have to take into consideration.
So, they are all like forming alliances, that have the same legal representation. Also, they have the same lobbies. They have the same public relations firms. So, in terms of what—what’s the common interest they want to—they want to defend in court or publicly, they form these groups. There are five groups right now in the Title III bankruptcy process. And, you know, it’s a big battle. It’s $74.8 billion debt battle, the biggest in the U.S. So, a lot of people are having different kinds of interests. And in the end, there are small bondholders, and then at the very end are Puerto Ricans.
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Carla Minet
reporter with the Center for Investigative Journalism, based in Puerto Rico, an award-winning independent media outlet that marks its 10th anniversary this year.
Jessica Stites
executive editor of In These Times.
— source democracynow.org 2017-10-19