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The Bond Buyer

Humanitarian crisis takes precedence over Puerto Rico fiscal recovery, debt restructuring

WASHINGTON – Hurricane Maria's and Irma's devastation of Puerto Rico and the resulting humanitarian crisis will wreak havoc with the Commonwealth's fiscal recovery and attempts to restructure its massive debt load, experts said this week.

Given the breadth of the destruction in Puerto Rico, bondholders should expect their interests to be put onto “a deep back burner,’’ said Matt Fabian of Municipal Market Analytics.

“I think that speaking too pointedly about bondholder concerns at this point is probably in poor taste,’’ he added.

Travelers stand in line at Luis Munoz Marin International Airport in San Juan, Puerto Rico, on Sept. 25, 2017. Hurricane Maria hit the Caribbean island last week, knocking out electricity throughout the island. The territory is facing weeks, if not months, without service as utility workers repair power plants and lines that were already falling apart. Alex Wroblewski/Bloomberg

Judge Laura Taylor Swain, who sits on the U.S. District Court for the Southern district of New York in Manhattan, issued an order on Tuesday indefinitely postponing the Title III bankruptcy case's omnibus hearing, which had been scheduled for Oct. 4. She asked stakeholders to submit comments by Sept. 28 on when the hearing should be rescheduled and said that all future hearings will be held in New York.

Swain's order followed a request on Monday by lawyers for Puerto Rico’s Fiscal Agency and Financial Advisory Authority that the omnibus hearing be shifted to Oct. 18 from Oct. 4.

“Despite Puerto Rico’s current circumstances, FAFAA desires to move forward with these Title III cases with as little disruption as possible,” the lawyers said. “FAFAA believes that any significant delay in advancing these Title III cases would place a cloud of uncertainty over these proceedings and potentially undermine the progress achieved to date.”

Meanwhile, several members of the Puerto Rico House and Senate, according to the El Vocero news website, called for the oversight board to stop enforcing the fiscal plan's austerity measures for at least this year and possibly over the next five years.

Tim Holler