The Puerto Rico Senate may still vote to exempt guaranteed and trust debt from a debt payment moratorium.
Popular Democratic Party Senators are split as to whether to protect these classes of debt, a party member in the Senate said Thursday, a day after the senate voted for a bill to provide some protection to debt held by Puerto Rico's cooperatives. That vote didn't include measures to protect general obligation, guaranteed, and Puerto Rico Sales Tax Finance Corp. (COFINA) bonds, which account for about 46% of the territory's public debt.
On Monday Sen. President Eduardo Bhatia Gautier said members of his PDP had decided to not approve an exemption for the guaranteed and trust debt.
However, the party member, who spoke on condition of anonymity, said about seven PDP senators support the House bill passed April 18 exempting this debt, about seven oppose exempting this debt, and four are undecided. The House bill on the topic also includes measures to allow municipalities to withdraw some of their money from the Government Development Bank for Puerto Rico.
The PDP senators have asked José Nadal Power, president of the Puerto Rico Senate Committee on Treasury and Finance, to figure out what to do with the bill. One idea is to split it into two bills – one on the municipalities and the other on protecting certain classes of the debt. The bill or bills will be discussed and possibly voted on Monday, when the Senate next comes into session.
In the House the New Progressive Party representatives voted for exempting the guaranteed and trust debt. If the eight NPP senators joined with seven PDP senators to vote for the exemption, there would be 15 votes, enough to carry the measure in the 27 seat Senate. However, Gov. Alejandro García Padilla has threatened to veto it and the total wouldn't be enough to overcome a veto.
The Senate would need 18 votes to override a veto by the governor.
The Senate voted 23 to 1 for steps to protect the cooperatives' bonds. The passed bill indicates that the cooperatives with a greater exposure to the GDB should be given a better deal in any reduced repayment of the bonds. This language was copied from U.S. Dodd-Frank Act passed in 2010, said Rep. Rafael Hernández Montañez.
According to Puerto Rico economist Heidi Calero, the cooperatives had $1.5 billion of Puerto Rico bonds as of summer 2015, of which $1.1 billion were held by financial cooperatives. Puerto Rico's financial cooperatives are very similar to credit unions in the United States. However, deposits in them are insured by an island based entity rather than by the Federal Deposit Insurance Corp.
