WASHINGTON – The Senate is poised to pass the Puerto Rico rescue bill after clearing what many say was the final hurdle for the legislation on Wednesday morning, invoking cloture by a vote of 68 to 32.
The bipartisan cloture vote eliminated the chance of a filibuster on the bill and cleared the way for general debate. Senate leaders allocated five hours for debate starting Wednesday afternoon with the expectation for a final vote at the end of the debate later in the day.
Cloture required 60 votes to pass, a larger majority than the simple majority of 51 senators the bill, called PROMESA, needs before moving to President Obama's desk. Of the 54 Republicans in the Senate, 36 voted for cloture, while 32 of the 46 Democrats also supported the procedural move.
Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Harry Reid, D-Nev., each urged their colleagues to pass the legislation during speeches after the cloture vote.
While some Democratic senators, like Sens. Robert Menendez, D-N.J., and Bernie Sanders, I-Vt., continue to oppose the bill, arguing it is "neo-colonialism," most legislators on both sides of the aisle still see the bill as a compromise and are expected to vote in favor of it, sources say.
"We all didn't get what we wanted," Reid said. "I wish we would have done more, but I'm satisfied that this is going to be a broad step forward to help the people of Puerto Rico."
Senate Finance Committee chair Orrin Hatch said the bill "leaves a lot to be desired" and criticized what he sees as a lack of transparency from the Puerto Rico government and the Obama administration, but said he is ultimately supporting the bill because not doing so at this point would hurt Puerto Ricans.
Resident Commissioner Pedro Pierluisi, Puerto Rico's nonvoting member of Congress, said on Wednesday that he was "extraordinarily grateful" for the bipartisan cloture vote and is hopeful "that the vote on final passage will be as strong or stronger."
In a letter to senators sent on Tuesday, Pierluisi reiterated his position that PROMESA "is an imperfect but indispensable bill that constitutes the only realistic means to prevent the collapse of Puerto Rico's government."
"Nothing truly worth doing is ever easy," Pierluisi said on Wednesday. "The effort to enact PROMESA has been challenging, but this absolutely vital effort is reaching its final stage."
McConnell put the cloture vote in motion Monday and moved to eliminate the possibility of amendments on the bill by filling the amendment "tree," which has only so many slots for proposed changes.
The quick action responds to building pressure on the Senate to move on the bill before Puerto Rico faces a $2 billion July 1 debt payment on which it is expected to default. Roughly $800 million of the payment is on constitutionally backed general obligation debt. Puerto Rico already faces several lawsuits from creditors and would be subject to more if it defaults on Friday.
The lawsuits expected to accompany a default could lead to court orders requiring the government of Puerto Rico to pay its creditors before it funds essential services like healthcare and education. Puerto Rico Gov. Alejandro Garcia Padilla has so far prioritized essential services.
One portion of PROMESA would protect the commonwealth from such a court order by putting a moratorium on any debt-related litigation filed between December of last year and the bill's enactment date. Puerto Rico and administration officials have urged senators through letters and in person discussions this week to support the bill, citing the need for the moratorium.
In addition to the moratorium on litigation under the bill, PROMESA would create a seven-member oversight board that would have the power to require balanced budgets and fiscal plans, as well as to file debt restructuring petitions on behalf of the commonwealth and its entities.
Republicans have been wary of the bill's restructuring process for its similarity to bankruptcy and the possibility it would create a precedent for fiscally troubled states like Illinois to come to Congress asking for similar treatment. Democrats are concerned with, among other things, the way the oversight board would be structured and its unilateral decision-making power. They have also criticized a separate provision that would allow the governor of Puerto Rico authorize employers to temporarily pay employees under the age of 25 a sub-minimum wage.
Congressional leadership would be responsible for appointing six of the seven board members while the president is responsible for appointing one. Additionally, only one of the board members is required to either have a permanent residence or place of business in the commonwealth.
Proponents of the bill have responded to that criticism by noting PROMESA only protects a territory with its restructuring regime and that the governor and board do not have to act in a way that hurts Puerto Rico.
Both Pierluisi and Garcia Padilla said last week that no governor is going to opt in to the minimum wage provision. Additionally, Pierluisi said he expects the board to have more than just one member who is representative of the Puerto Rican people. Obama has also hinted he has an interest in putting more than one Puerto Rican on the board, saying he is committed to making sure Puerto Ricans are well-represented in the process.
Puerto Rico Bonds Trade Higher
Prices of Puerto Rico bonds turned higher on the news.
The benchmark Puerto Rico Commonwealth Series 2014A general obligation 8% bonds of 2035 traded at a high price of 66.50 cents on the dollar, a low yield of 12.712%, in seven trades totaling $17.63 million. On Tuesday, the GO 8s of 2035 traded at a high price of 65.875, or low yield of 12.785%, in 16 trades totaling $29.66 million.
In other trade, the Puerto Rico Sales Tax Financing Corp.'s 2009 First Subseries A 5.75% sales tax revenue bonds of 2037 traded at a high price of 49.20 cents on the dollar, a low yield of 12.737%, in 15 trades totaling $4.5 million. On Tuesday, the revenue 5 3/4s of 2037 traded at a high price of 47.415, or low yield of 13.184%, in four trades totaling $400,000.
The Puerto Rico Aqueduct and Sewer Authority Series 2012A senior lien revenue 5.25% bonds of 2042 traded at a high price of 67.50 cents on the dollar, a low yield of 8.325%, in 16 trades totaling $2.75 million. On Tuesday, the revenue 5 1/4s of 2042 traded at a high price of 66.599, or low yield of 8.441%, in nine trades totaling $66,000.
The Commonwealth Highway and Transportation Authority's 1998 Series A 4.75% transportation revenue bonds of 2038 traded at a high price of 98.00 cents on the dollar, a low yield of 4.9%, in 15 trades totaling $520,000. On Tuesday, the revenue 4 3/4s of 2038 traded at a high price of 94.25, or low yield of 5.191%, in four trades totaling $190,000.
In equities, the stock of Assured Guaranty Ltd. was trading up almost 4% while the stock of MBIA Inc. was about 3.5% higher.
