Saturday, March 05, 2016

Puerto Rico Utility May Pay Contractors Before Debt, Filing Says

Puerto Rico’s main water utility may not have enough money to repay certain bonds if it needs to redirect funds to pay contractors, according to a filing on the Municipal Securities Rulemaking Board’s website.

The Puerto Rico Aqueduct and Sewer Authority’s board on Feb. 16 approved an alternative plan to divert money to pay contractors if the agency fails to obtain another source of funding by June 30, according to the March 4 filing posted on MSRB’s website, called EMMA. Prasa wants to create a new entity that would sell $750 million of debt backed by dedicated revenue, called a securitization bond, to finance capital projects and repay outside workers and businesses. Island lawmakers are working on legislation that would allow the transaction.

Without the bond sale, Prasa may need to use its available cash to pay contractors rather than make monthly interest and principal payments on certain debt, including state revolving fund loans, rural development bonds and a note held by the Puerto Rico Public Finance Corp, according to the EMMA notice.

“Such insufficiency will reduce the amount available to pay the interest accrual and principal accrual on certain commonwealth guaranteed indebtedness and commonwealth supported indebtedness,” according to the filing.

Bonds that still would have sufficient funds for repayment include Prasa’s 2008 Series A and Series B revenue bonds guaranteed by the commonwealth, according to the notice.

Prasa had $4.7 billion of debt as of Sept. 30. The bonds carry junk ratings from the three largest credit-rating companies.

Michelle Kaske  

Puerto Rico Utility May Pay Contractors Before Debt, Filing Says

Friday, March 04, 2016

The Administration’s Puerto Rico Jujitsu Threatens the States’ Ability to Borrow

The New York Times reported last week on some of the details of the Obama Administration’s recovery plan for Puerto Rico, and it does not bode well for investors — or for states and municipalities that borrow money.

The island’s government is $72 billion in debt, with billions more in unfunded pension obligations.  It has been in recession for a decade during which time it has never run a balanced budget, and today it is nearly bankrupt.  The government has appealed to the federal government to help, and the Treasury has drawn up a plan.  A major feature of that plan is that it will ignore the law by putting government employee pensions in front of general obligation bondholders in the hierarchy of credits, despite the provision of Puerto Rico’s Constitution that mandates GO bondholders will be paid before all other government obligations.  The rationale for doing so is, essentially, that public sector pension holders are in greater need of the money than the investors (many of whom are retirees and pensioners themselves), so this ex post change is simply a matter of fairness.

The bondholders, naturally, do not like this. After lending money to the Puerto Rican government under the explicit assurance that they would have the highest priority in all payment scenarios, having this promise revoked seems a tad unfair, as well as blatantly illegal.

It isn’t just the Puerto Rican bondholders that should be angry.  The problems with screwing over bondholders in order to protect government pensioners goes farther than its illegality:  Doing so sets a precedent for dealing with other bankrupt states in the future.  While the Administration avers that this in no way sets a precedent, since the fifty states have recourse to use Chapter 9 of the federal bankruptcy code to reorganize, the reality is otherwise.

The Times correctly notes that Chapter 9 makes no provision for the states extricating themselves from their own general obligation debt.  No out was given for a very good reason:  Foreclosing the possibility of a default up front (at least as much as possible) makes it easier and cheaper for states to borrow money.

The Obama Administration’s proposal threatens to upset this equilibrium.  By upending the law and decades of precedent, the Treasury’s plan threatens to make it more difficult for the states and municipalities to borrow money as well, since their lenders see that they too, might get their promise of being first to be repaid pulled out from under them.

This administration has a long history of picking winners and losers in bankruptcy.  In the Chrysler and GM bankruptcies, the secured bondholders took a major hit being reduced to unsecured status while workers and pensioners were elevated to protected status, and the Detroit bankruptcy did the same thing.

While it may seem “fair” to help little old ladies rather than mean old hedge funds, the investors who lost money in these maneuvers weren’t Wall Street plutocrats — they were regular people who invested their money into assets they thought were safe, because the law explicitly said they were. Many of them are retirees and pensioners themselves, and thousands of them will see a reduction in the value of their retirement funds.  CNN recently reported that 45% of Puerto Rico’s debt is held by “middle class Puerto Ricans” and “average Joe Americans.”  Abrogating bankruptcy law isn’t akin to Robin Hood — it’s transferring money from one group of retirees to another.

A Puerto Rico bailout that punishes secured bondholders would represent a short-term political win for the Treasury but at a long-run cost to the rest of the country in the form of higher borrowing rates.  It would be a terrible precedent.  It is hard to conceive of a reason for a Republican Congress to acquiesce to such a thing, or to allow a control board to do such a thing down the road.

By Ike Brannon

The Administration’s Puerto Rico Jujitsu Threatens the States’ Ability to Borrow

Region's largest solar plant to be built in Puerto Rico

Puerto Rico's governor says the Caribbean's largest solar plant will be built in the U.S. territory's western region.

Alejandro Garcia Padilla said Thursday that Oriana Energy will invest more than $160 million to build a plant capable of producing 100,000 megawatts of energy a year. He said the plant would start operating by year's end in the northwest coastal town of Isabela.

Garcia said the project would help lower electricity costs on an island where power bills are on average twice those of the U.S. mainland, in part because of its heavy dependence on petroleum.

Puerto Rico has other smaller solar plants already in operation.

Region's largest solar plant to be built in Puerto Rico

Puerto Rico Debt Crisis Could Lead to Catastrophy

Administration officials are warning of a humanitarian crisis if Congress does not move to address Puerto Rico’s debt crisis.

The island territory is not only unable to make debt service payments on about $70 billion in debt, but is struggling to fund public safety, health and education, according to Antonio Weiss, counselor to Treasury Secretary Jacob Lew. The worry is that the lack of money could have catastrophic consequences for Puerto Ricans.

“Puerto Rico is already in distress, what started as a recession has turned into a fiscal and a liquidity crisis that shows signs of becoming a humanitarian one as well,” Weiss told a House panel last week.

While House Speaker Paul D. Ryan has given the House until March 31 to address Puerto Rico’s crisis, some Republicans on Capitol Hill are questioning the Obama administration’s proposal to allow the island’s government to, in effect, declare bankruptcy.

Rep. Tom McClintock, R-Calif., said that allowing Puerto Rico to walk away from a portion of its debt through a bankruptcy-like process would undermine the sovereign debt of the other 50 states.

“I’m afraid that credit markets are going to say, ‘Well, wait a second. If they can do that to the Puerto Rican debt, they can do that for California and Illinois and New York,’” McClintock said.

A number of governors have suggested that investors will demand that states pay higher interest rates if Puerto Rico’s debt is restructured, he noted.

Weiss, though, said that proposed legislation would cover U.S. territories, of which Puerto Rico is one, and not states. The administration has talked to bond investors about the plan and they understand this. Those investors have said that any move to curb Puerto Rico’s crisis – and its continuing and projected defaults on bond payments – would help calm the fears of investors who put money into state bonds, he says.

It’s easy to understand the concerns about the island’s trajectory from a few numbers. Puerto Rico’s unemployment rate is still 12.2 percent, almost double the rate of 6.8 percent in Mississippi, the state with the highest rate, according to data from the Bureau of Labor Statistics.

Puerto Rico’s unemployment rate has dropped from more than 16 percent to its current level, but not because businesses are creating jobs there. Driving the decline in the unemployment rate is the island’s unprecedented depopulation.

Between 2010 and 2015, the U.S. population increased 4 percent, or 12.7 million people. Nearly 60 percent of the increase came from births outnumbering deaths, with the rest coming from immigration.

Over the same period, Puerto Rico lost 7 percent of its population. Births outnumbered deaths by 44,000, but one out of every 13 people left the island, a total of 296,000 who emigrated. If they had not left the island, causing the labor force to shrink, and if businesses had created the same number of jobs, the island’s unemployment rate would have ballooned to 29 percent.







By Doug Sword

Puerto Rico Debt Crisis Could Lead to Catastrophy

Wednesday, March 02, 2016

Puerto Rico Won t Make Make Full May Payment

Unless the United States Congress acts to modify Puerto Rico’s required debt payments, Puerto Rico won’t make the full May bond payment, Puerto Rico Gov. Alejandro García Padilla said.







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Puerto Rico Won t Make Make Full May Payment

Your Call: Breaking down Puerto Rico’s debt crisis

On the March 2nd edition of Your Call, we’ll dig to the roots of Puerto Rico’s fiscal crisis.



The U.S. territory is $73 billion dollars in debt, having used investor-friendly tax-free bonds to finance basic services. But last June, the island’s Governor declared its debt un-payable. What roles have Washington and Wall Street played in Puerto Rico’s debt crisis and what are its far-reaching implications? It’s Your Call, with guest host Renee Kemp and you.

Guests: 

Ed Morales, author and journalist, lecturer at Columbia University’s Center for the Study of Ethnicity and Race

David Dayen, freelance reporter  

Web Resources:

The American Prospect: How Hedge Funds Deepen Puerto Rico’s Debt Crisis

The Nation:  The Roots of Puerto Rico’s Debt Crisis—and Why Austerity Will Not Solve It

The Guardian: Puerto Rico in crisis: weighed down by $73bn debt as unemployment hits 14%

The Guardian: Puerto Rico's intensifying debt crisis has residents bracing for the worst

The Guardian: Puerto Rico's soaring cost of living, from giant electric bills to $5 cornflakes

The Nation:  How Hedge and Vulture Funds Have Exploited Puerto Rico’s Debt Crisis

The Nation:  Is an Obama Donor Tying the President’s Hands on Puerto Rico’s Debt Crisis?

Jacobin: Puerto Rico’s Dance With Debt

Latino USA: Puerto Rico debt crisis

Bloomberg: Puerto Rico’s Slide

The Hill: Puerto Rico’s debt crisis: A Lehman moment for the island

The Real News Network: How Tax Dodging Put Puerto Rico on the Road to Debt (1/2)

The Real News Network:Cash-Strapped Puerto Rico at Hedge Funds' Mercy (2/2) 



San Juan, Puerto Rico

San Juan, Puerto Rico




Your Call: Breaking down Puerto Rico’s debt crisis

UPDATE 1-Puerto Rico working on creditor counterproposal-presentation

Puerto Rico has received counteroffers to a proposal it made to creditors earlier in the year, and is working on a counterproposal, the U.S. territory said in a presentation posted on the website of its Government Development Bank on Tuesday. (bit.ly/1QkO2uI)

In a plan made public in February, Puerto Rico asked its creditors to take a huge "haircut" that would slash its total outstanding debt by about $23 billion in an opening salvo to resolve a crippling debt crisis.



"The Commonwealth has received counteroffers from certain creditor groups and is working to develop a counterproposal that is responsive to all of the creditor feedback but falls within the parameters of the Commonwealth's ability to pay," Puerto Rico said in the presentation.



Creditors of Puerto Rico's sales tax authority, COFINA, made a counteroffer in February, saying they would extend maturities but forgo cuts to principal that the original offer would entail.



Other creditor groups which have organized include holders of general obligation bonds and Government Development Bank bonds, Puerto Rico's presentation said. (Reporting by Megan Davies; Editing by Phil Berlowitz)

UPDATE 1-Puerto Rico working on creditor counterproposal-presentation

Puerto Rico working on creditor counter proposal-presentation

Puerto Rico has received counter-offers to a proposal it made to creditors earlier in the year, and is working on a counterproposal, the U.S. territory said in a presentation posted on the website of its Government Development Bank on Tuesday.

In a plan made public in February, Puerto Rico asked its creditors to take a huge "haircut" that would slash its total outstanding debt by about $23 billion in an opening salvo to resolve a crippling debt crisis.



"The Commonwealth has received counteroffers from certain creditor groups and is working to develop a counterproposal that is responsive to all of the creditor feedback but falls within the parameters of the Commonwealth's ability to pay," Puerto Rico said in the presentation. (Reporting by Megan Davies; Editing by Phil Berlowitz)

Puerto Rico working on creditor counter proposal-presentation

Tuesday, March 01, 2016

Puerto Rico exposure eyed as bond insurer MBIA set to post results

MBIA Inc (MBI.N), a bond insurer heavily exposed to fiscally troubled Puerto Rico, will report fourth-quarter earnings after the bell on Monday when investors will look for commentary on potential losses from exposure to the island's debt.

Many investors have shunned the company's shares due to uncertainty over exactly how much of its $4 billion exposure to Puerto Rico's debt is at risk as the U.S. commonwealth negotiates a restructuring deal with creditors.

Mark Palmer, who follows the stock for brokerage firm BTIG, said investors will be waiting for management's conference call on Tuesday morning for updated information on the progress of various restructuring talks.

"What investors are looking for is any sort of inkling from management in terms of what the future direction is," he said.

Palmer said investors would monitor any changes in the company's loss provisions as they try to gauge how management is viewing and preparing for potential risks.



MBIA is tipped to post earnings of 11.5 cents per share in the fourth quarter of 2015, up 15 percent on the same period last year, according to a consensus estimate compiled by Thomson Reuters I/B/E/S.

Puerto Rico's House of Representatives has approved a bill aimed at overhauling the island's power utility PREPA, pushing the agency a step closer to finalizing a deal with creditors to restructure more than $8 billion in debt.



Puerto Rico's officials also proposed a wider restructuring plan at the end of January that would cut bond holders by 45 percent in a move seen as an opening salvo in negotiations with bondholders.

MBIA's shares are trading at a substantial discount to the company's book value. The shares traded up 4.3 percent at $7 on Monday compared to a book value of $24.94 per share. Recent optimism over events in Puerto Rico has pushed the stock up 7.8 percent so far this year.



A conference call is scheduled for Tuesday 8:00 a.m. ET (1300 GMT).



(Reporting by Edward Krudy; Editing by Meredith Mazzilli)

Puerto Rico exposure eyed as bond insurer MBIA set to post results

Top Puerto Rico Luxury Hotel Targeted in Tax Evasion Case

The administrators of a top luxury hotel in Puerto Rico have been arrested and charged in a tax evasion case as the U.S. territory cracks down on corruption amid a worsening economic crisis, officials said Monday.

The island's Justice Department said Wilhelm Sack and Harold Davies Mayne of the Horned Dorset Primavera are accused of withholding more than $600,000 in room occupancy tax over the past six years.
The announcement comes nearly a year after the hotel filed for Chapter 11 bankruptcy as it struggled with nearly $1.7 million in debts, including more than $800,000 owed to Puerto Rico's Treasury Department and more than $320,000 owed to the island's struggling power company.
Sack is being held on $29,000 bond and Mayne on $232,000 bond. They are scheduled to appear in court March 14 for a preliminary hearing.
Adrian Santiago, the hotel's reservation manager, said he had no comment.
Melanie Matos, an attorney for Sack, told The Associated Press that negotiations were underway and the case is tied to an old debt being disputed in a local court and bankruptcy court.
"We hope that this can be rapidly resolved and are looking forward to giving the best service to the hotel guests," she said.
It is one of the most high-profile cases to date since authorities began pursuing suspected tax evaders late last year in an attempt to recover millions of dollars. The island government's liquidity has dwindled amid a nearly decade-long economic slump and it faces $72 billion in public debt that the governor has said is unpayable and needs restructuring.
Officials say Sack and Maynes are accused of withholding tax revenues owed to the island's Tourism Company from December 2008 to October 2015.
"Horned Dorset has been an institution for Puerto Rico tourism, holding us up high for decades in the international market," said Justice Secretary Cesar Miranda. "It's a shame they haven't met their tax obligations. ... We will pursue this case like any other."
The two men face a total of 174 charges.
The hotel in the popular tourist town of Rincon in western Puerto Rico has suites that go for up to $1,600 a night.
———
By danica coto

Top Puerto Rico Luxury Hotel Targeted in Tax Evasion Case

Monday, February 29, 2016

Puerto Rican crisis roils 2016 race

Puerto Rico's economic crisis could play a critical role in the race for the White House.

Years of economic decline has driven hundreds of thousands of island residents to the US mainland, and is upending the political calculus on the presidential trail.

Puerto Rican residents cannot vote for the president in the general election, but can cast votes in primary contests.

The hotly contested Republican primary now has every candidate scrambling for whatever delegates they can find, leaving Puerto Rico's oft-ignored primary on March 6 a unique opportunity for a pickup.

Even more significantly, a huge chunk of the Puerto Ricans that fled the island resettled in Florida, presenting a new voting bloc in that critical swing state.

“Over half are going to one state, and that’s Florida. This will have an impact on the primaries and subsequent November elections,” said Amilcar Antonio Barreto, an associate professor at Northeastern University and an expert on Puerto Rican politics. “They’re a big wild card.”

Puerto Ricans occupy a unique space in U.S. politics. While on the island, they are residents of a commonwealth and cannot ultimately vote for the president. But they are also American citizens, and free to move to the mainland whenever they want, where they can vote in the general election.

And hundreds of thousands of Puerto Ricans have made that choice, as a massive debt crisis is forcing the island to ask Congress to let it declare bankruptcy on some of its bonds and made providing basic public services a significant challenge.

The mass exodus from Puerto Rico has placed the island in the sights of competing campaigns, eager to win over not only island residents, but former residents now spread across the country.

According to experts, Puerto Ricans generally lean Democratic by a roughly 2 to 1 margin, and Hillary ClintonHillary Rodham ClintonFinal Clinton emails coming todayBlack GOP senator condemns Trump for failing to denounce KKK Trump gets first Senate endorsementMORE is expected to win the Democratic primary on the island in June.

But every delegate will count for GOP candidates, with talk of a contested convention growing. And it seems as if the island is up for grabs, with no apparent polling having been done for Republicans.

Prediction markets give Marco RubioMarco RubioRubio attacks Trump’s short fingers What would TrumpCare look like?Black GOP senator condemns Trump for failing to denounce KKKMORE an edge, but Donald TrumpDonald TrumpLouie Gohmert faces his biggest challengeRubio attacks Trump’s short fingers What would TrumpCare look like?MORE’s extensive real estate ventures have given him a significant presence on the tourism-heavy island.

“My guess is that the majority of them are going for Trump,” said Charles Venator-Santiago, an associate professor at the University of Connecticut. “He’s a known quantity in Puerto Rico.”

While Puerto Ricans, as U.S. citizens, are not impacted by immigration policies, Barreto wondered if Trump’s heavy hand on that topic could hurt him if they feel like the broader public is becoming hostile to Hispanics as a whole.

In past GOP primaries, Puerto Rican voters have supported the front-runners, handing Mitt Romney and John McCainJohn McCainRubio earns rare primary endorsement from key Va. newspaperPuerto Rican crisis roils 2016 raceDem candidates buck Obama on GitmoMORE easy wins during their respective White House runs.

Presidential candidates looking to curry favor on the island often do so by nodding toward making it the 51st state. In the past, a majority of Puerto Ricans have supported becoming a state, which would subject the island’s residents to federal income taxes, but also provide access to heightened government benefits. But Congress has generally ignored efforts along that front.

Despite inaction from Washington, presidential candidates including Ben Carson and Rubio have voiced support for Puerto Rican statehood. But the ongoing debt crisis on the island has added a new feature to the politics.

Puerto Rico’s efforts to convince Congress to let it go bankrupt on some of its debt have been met with fierce pushback from investment firms holding those bonds. And generally speaking, support for bankruptcy has fallen down party lines, with Republicans opposed and Democrats in favor.

That has held true on the campaign trail as well. Clinton has publicly backed bankruptcy for Puerto Rico. Many Republicans have steered clear of the topic, but Rubio announced his opposition to it in September, before campaigning on the island.

During Thursday’s debate, Rubio was pressed on his Puerto Rico stance. He argued that it made no sense to allow the island to declare bankruptcy, since the underlying economic and fiscal challenges would remain. And he squarely blamed the island’s current government for the state of affairs.

“Bankruptcy doesn’t work unless you change the way you’re operating,” he said in the CNN debate. “The leadership on the island has to show their willingness to get their house in order.”

That, in turn, earned a sharp rebuke from Puerto Rico’s governor, Alejandro Garcia Padilla.

“I can only hope the four million Puerto Ricans currently living on the mainland, including the one million that are Rubio’s constituents, and the 3.5 million on the Island will remember the Senator’s desertion of the Puerto Rican people when they cast their votes in the primaries and the presidential election,” he said in a statement Friday.



For its part, the Obama administration is pushing a balanced approach that would combine heightened federal oversight of the island’s finances with the ability for Puerto Rico to restructure some of its debt if it cannot strike a deal with creditors.

Such a two-pronged approach appears to be gaining some momentum in Congress, as lawmakers hope to craft a legislative package before the end of March.

Island officials warn that it’s possible, if not probable, the island will default on mandatory payments coming due in May and July.

By Peter Schroeder

Puerto Rican crisis roils 2016 race

Saturday, February 27, 2016

Puerto Rico's Debt Crisis is Focus of 2 Congressional Hearings as Dems Propose a "Super-Bankruptcy"

Democracy Now! co-host Juan González reports Congress held two hearings on the Puerto Rican debt crisis Thursday after House Speaker Paul Ryan set a March 31 deadline to pass a bill that addresses the issue. Democrats and Republicans are divided on what action to take. Democrats have proposed a "super-bankruptcy" that would allow the U.S. territory to settle its debts with creditors under a restructuring deal. Republicans want a control board if it provides financial assistance, as has happened in places like Detroit. But González notes Puerto Rico has objected to such control since it is a self-governing territory.

AMY GOODMAN: Juan, before we go to our next segment, you wrote an interesting piece in the New York Daily News about hearings on Puerto Rico, an issue that did not come up in the Republican presidential primary debate, nor the Democrats.

JUAN GONZÁLEZ: Well, it actually hasn’t come up in any of the debates. But there were two hearings in the House of Representatives in separate committees yesterday, because Speaker Ryan has set a March 31st deadline for a bill to be passed in the House of Representatives to address the financial crisis in Puerto Rico. And so the two House committees immediately began to work this week.

But the problem is there’s a huge divide between the Democrats and the Republicans as to how to address the Puerto Rico crisis. Antonio Weiss, who’s the Obama administration’s point person in Treasury, testified at one House hearing, and he urged two major things that had to be done immediately on Puerto Rico. One is the Congress passing "super-bankruptcy" to allow the territory to consolidate all of its debts and have a universal settlement with all the creditors in a restructuring deal, something that virtually all the Republicans on the panel questioned as to whether that would create a huge crisis with the financial industry and also whether that would mean that other states would end up having to have the increased borrowing costs for their bonds as a result of Puerto Rico’s default.

The other big issue is what kind of financial controls will the Congress exercise over Puerto Rico in any kind of assistance that’s given to the island. And Weiss urged the—many Republicans want a direct financial control board, something like what happened in Detroit or what’s happened in Washington, D.C., where a group takes over—a financial control board takes over the finances of an entity that is virtually bankrupt. But Weiss reminded the Congress that Puerto Rico is a self-governing territory, and you cannot have the same kind of direct financial control over Puerto Rico that you would over a city. And that’s become another major issue. So I’m not sure that any settlement is going to be reached. But Weiss warned the Congress that Puerto Rico has another $400 million bill due May 1 and $2 billion in debt payment due July 1, and it cannot possibly pay those bills, as well. So the issue is how quickly will the Congress act based on Ryan’s promise, and we’re going to see what happens in the future.

AMY GOODMAN: And, of course, we’ll continue to follow it. Thanks, Juan, for great reporting.

Puerto Rico's Debt Crisis is Focus of 2 Congressional Hearings as Dems Propose a "Super-Bankruptcy"

White House steps up $400M aid for Puerto Rico

Hoping to spur economic development in financially ailing Puerto Rico, the White House said Thursday it will speed access to almost $400 million for roads and other public works projects on the island.

Transportation Secretary Anthony Foxx, during a visit to the U.S. territory Thursday, was to sign agreement leading to more technical assistance from Washington and more immediate access to money to keep road projects on schedule, said Jason Miller, deputy director of the National Economic Council, which advises the president on economic policy.

Other Cabinet secretaries are expected to follow in the months ahead as the administration tries to help Puerto Rico weather its crisis.

Interior Secretary Sally Jewell will visit in April to examine ways to strengthen tourism. Agriculture Secretary Tom Vilsack will come in May.

Transportation Secretary Anthony Foxx visited the island on Thursday.Win McNamee/Getty Images
Transportation Secretary Anthony Foxx visited the island on Thursday.


But the White House also said Congress needs to give Puerto Rico the ability to seek bankruptcy protection under a framework reserved for U.S. territories. That proposal has drawn objections in Congress, with some Republican leaders saying Puerto Rico has the tools to restructure a large portion of its debt voluntarily.

The administration has also called for increased Medicaid funding and making a tax credit for low-income workers available to people living in Puerto Rico.

Puerto Rico has $72 billion in public debt that the governor has said is unpayable.

A homeless man stands in front of a closed down fast food restaurant in the colonial district of Old San Juan, Puerto Rico, in August 2015. The White House has agreed to speed up access to almost $400 million for public works on the island.Ricardo Arduengo/AP

A homeless man stands in front of a closed down fast food restaurant in the colonial district of Old San Juan, Puerto Rico, in August 2015. The White House has agreed to speed up access to almost $400 million for public works on the island.

White House steps up $400M aid for Puerto Rico

Thursday, February 25, 2016

Exclusive: U.S. airfares to Puerto Rico slide; debt crisis, Zika weigh

U.S. airlines have slashed leisure fares to Puerto Rico in recent months to lure travelers to the debt-strapped island, hit by economic turmoil and lately the arrival of the mosquito-borne Zika virus.

The lowest fares to San Juan, Puerto Rico, have fallen 22 percent on average from a year ago, according to an early February analysis of six of the busiest U.S. domestic routes to the island's capital by Harrell Associates, shared exclusively with Reuters.
The drop outpaced an 18 percent fall nationwide in the high-restriction fares during that time, according to the travel consultancy's analysis.
"It's a combination of slack demand in both directions," said Robert Mann, an airline industry consultant.
"Leisure travelers going to Puerto Rico are concerned both about the state of the economy and the extent to which leisure resort facilities are going to be properly maintained," he said. "If you're a Puerto Rican resident, the buying power just isn't there."

With a stagnating economy and an exodus of its population to the mainland, the U.S. territory has defaulted on part of its $70 billion in debt and asked its creditors to renegotiate the borrowing terms to slash its debt burden.

Puerto Rico is also one of 28 countries and territories in the Americas battling the Zika virus. It reported 63 cases as of Feb. 18, and U.S. health officials expect many thousands of residents to contract the virus once the mosquito season peaks this summer.

"Mosquito-borne viruses are a severe and immediate threat to the health and safety of my constituents," the territory's representative to Congress, Pedro Pierluisi, said in a statement on Tuesday, urging the U.S. government to help reduce threatening mosquitoes on the island.

CONFERENCES CANCELED

Harrell Associates data showed the lowest fares to San Juan already dropped more than 14 percent in early February from a month before, following a Jan. 15 travel advisory for pregnant women from the U.S. Centers for Disease Control and Prevention. Fares slipped only 1 percent nationwide during this time.(http://tmsnrt.rs/1QwvgNN)

Scientists are investigating a potential link between Zika infections of pregnant women and more than 4,000 suspected cases in Brazil of microcephaly, a condition marked by abnormally small head size that can result in developmental problems.

Airlines have yet to report lower bookings due to the virus.

Frank Comito, chief executive of the Caribbean Hotel and Tourism Association, said a recent study that found bookings were down 3.4 percent to Zika-hit regions had made a causal "leap," noting factors such as hot January weather and global economic uncertainty.

However, three conferences at major Puerto Rican hotels were recently canceled and one postponed because of concerns over the virus, costing the island 1,969 hotel-room nights, said Joyce Martinez, vice president of business development and sales at nonprofit Meet Puerto Rico.

Puerto Rico hosts an estimated 20 to 30 conferences each month, she said.

Data suggests fares have fallen not from a surge in seat supply but because airlines want to stimulate demand.

According to Harrell Associates, the one-way fares excluding taxes and fees dropped 36 percent in early February from a year ago to $80 from New York Kennedy, a hub for JetBlue Airways Corp and American Airlines Group Inc .

There was a 1 percent reduction in seats on the route in this period, aviation data and analytics company OAG said.

JetBlue, the largest airline in San Juan, and American declined to comment on pricing or whether either would reduce service to the island.

At American's Philadelphia hub there was a 40 percent drop in the fares to $125, buoyed partially by a 13 percent rise in seats.
Atlanta flights had a 15 percent reduction in seat supply and the only fare rise, up 21 percent.
(Additional reporting by Toni Clarke in Washington and Megan Davies in New York; Editing by Matthew Lewis)
By Jeffrey Dastin and Nick Brown

Exclusive: U.S. airfares to Puerto Rico slide; debt crisis, Zika weigh

Wednesday, February 24, 2016

Exclusive: U.S. airfares to Puerto Rico slide; debt crisis, Zika weigh

U.S. airlines have slashed leisure fares to Puerto Rico in recent months to lure travelers to the debt-strapped island, hit by economic turmoil and lately the arrival of the mosquito-borne Zika virus.

The lowest fares to San Juan, Puerto Rico, have fallen 22 percent on average from a year ago, according to an early February analysis of six of the busiest U.S. domestic routes to the island's capital by Harrell Associates, shared exclusively with Reuters.

The drop outpaced an 18 percent fall nationwide in the high-restriction fares during that time, according to the travel consultancy's analysis.

"It's a combination of slack demand in both directions," said Robert Mann, an airline industry consultant.

"Leisure travelers going to Puerto Rico are concerned both about the state of the economy and the extent to which leisure resort facilities are going to be properly maintained," he said. "If you're a Puerto Rican resident, the buying power just isn't there."

With a stagnating economy and an exodus of its population to the mainland, the U.S. territory has defaulted on part of its $70 billion in debt and asked its creditors to renegotiate the borrowing terms to slash its debt burden.

Puerto Rico is also one of 28 countries and territories in the Americas battling the Zika virus. It reported 63 cases as of Feb. 18, and U.S. health officials expect many thousands of residents to contract the virus once the mosquito season peaks this summer.

"Mosquito-borne viruses are a severe and immediate threat to the health and safety of my constituents," the territory's representative to Congress, Pedro Pierluisi, said in a statement on Tuesday, urging the U.S. government to help reduce threatening mosquitoes on the island.





CONFERENCES CANCELED

Harrell Associates data showed the lowest fares to San Juan already dropped more than 14 percent in early February from a month before, following a Jan. 15 travel advisory for pregnant women from the U.S. Centers for Disease Control and Prevention. Fares slipped only 1 percent nationwide during this time.(tmsnrt.rs/1QwvgNN)

Scientists are investigating a potential link between Zika infections of pregnant women and more than 4,000 suspected cases in Brazil of microcephaly, a condition marked by abnormally small head size that can result in developmental problems.



Airlines have yet to report lower bookings due to the virus.

Frank Comito, chief executive of the Caribbean Hotel and Tourism Association, said a recent study that found bookings were down 3.4 percent to Zika-hit regions had made a causal "leap," noting factors such as hot January weather and global economic uncertainty.

However, three conferences at major Puerto Rican hotels were recently canceled and one postponed because of concerns over the virus, costing the island 1,969 hotel-room nights, said Joyce Martinez, vice president of business development and sales at nonprofit Meet Puerto Rico.

Puerto Rico hosts an estimated 20 to 30 conferences each month, she said.



Data suggests fares have fallen not from a surge in seat supply but because airlines want to stimulate demand.

According to Harrell Associates, the one-way fares excluding taxes and fees dropped 36 percent in early February from a year ago to $80 from New York Kennedy, a hub for JetBlue Airways Corp (JBLU.O) and American Airlines Group Inc (AAL.O).

There was a 1 percent reduction in seats on the route in this period, aviation data and analytics company OAG said.

JetBlue, the largest airline in San Juan, and American declined to comment on pricing or whether either would reduce service to the island.

At American's Philadelphia hub there was a 40 percent drop in the fares to $125, buoyed partially by a 13 percent rise in seats.

Atlanta flights had a 15 percent reduction in seat supply and the only fare rise, up 21 percent.



(Additional reporting by Toni Clarke in Washington and Megan Davies in New York; Editing by Matthew Lewis)





Exclusive: U.S. airfares to Puerto Rico slide; debt crisis, Zika weigh