NEW YORK, Oct 8 (Reuters) - Puerto Rico's representative in
Congress on Thursday said he is introducing a bill that would
authorize the U.S. Treasury Department to guarantee repayment of
the U.S. territory's bonds.
Puerto Rico, with $72 billion debt and in recession for
nearly a decade, is trying to renegotiate its debt. It defaulted
in August by paying only a fraction of what was due on some
bonds. urn:newsml:reuters.com:*:nL1N1252LN
Puerto Rico does not presently have access to the capital
markets on reasonable terms. It is losing approximately 60,000
residents a year to the U.S. states and may soon be required to
curtail essential government services, Pedro Pierluisi said in a
statement.
The bill asks that the Treasury have authorization to
guarantee payment after first determining whether Puerto Rico's
government has shown meaningful improvement in managing its
finances, according to a press release from Pierluisi's office.
Any notes guaranteed by the Treasury would be used solely to
meet urgent short-term financing needs.
A second provision in the bill would authorize the U.S.
Federal Reserve to buy certain short-term bonds issued by
government entities in Puerto Rico, the statement said.
"Somewhere down the road, when Puerto Rico has got much
worse, I think Congress is going to have to get involved in
Puerto Rico in more size, and when they do, there is going to
need to be some mechanism to attract some money to Puerto Rico,"
said Height Securities analyst Daniel Hanson. "One way to do
that is to be a counterparty or co-signatory on a loan."
Getting congressional support for bills related to Puerto
Rico has proven an uphill task. A bill Pierluisi introduced in
the House to allow Puerto Rico's distressed public agencies to
access Chapter 9 bankruptcy laws has not drawn support from
Republicans, who control Congress. A companion bill in the
Senate has also not drawn Republican support.
A letter signed by a number of Democratic senators on
Thursday, distributed by Pierluisi's office, called for Iowa
Senator Chuck Grassley to hold a hearing soon on Chapter 9.
Grassley is the Republican chairman of the Senate Judiciary
Committee, which has jurisdiction over the Chapter 9 bill in the
Senate.
Hanson said that while he did not think Pierluisi's bill
concerning the Treasury would be passed, he said he "wouldn't be
very surprised to see a version of it get passed someplace."
The U.S. Treasury was not immediately available for comment.