You know it is a newsy year when a term once applied exclusively to special events and gatherings of friends – FOMO, or the fear of missing out – expands to include the latest web headlines. And, while we are as captivated as anyone by the biggest news developments, we remain especially focused on the headlines related to developments in the Commonwealth of Puerto Rico.
U.S. District Court Judge Laura Swain is presiding over the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) Title III bankruptcy of Puerto Rico and the related disputes between Puerto Rico and its creditors, municipalities and insurers.
Even though the pace of news coverage seems to have picked up and Commonwealth officials and their decisions continue to be scrutinized, some developments may have been overlooked:
Net revenue collections in July 2017 were 8% higher than had been estimated: The Commonwealth collected just shy of $650 million, nearly $49 million more than anticipated. Year to date in 2017, the Commonwealth has collected slightly more than $6 billion dollars (through July 31), a 1.2% increase over the same period in 2016.
For fiscal year 2017, which ended June 30, general fund net revenues exceeded estimates by 2.6%, which Puerto Rico’s Treasury Secretary called “a significant fiscal accomplishment.”
Puerto Rico’s cash position as of June 30, 2017 was $1.5 billion higher than the amount included in the budget submitted to and approved by the oversight board. As a result, new questions are being raised about why payments on debt cannot be made, about the reliability of the financial numbers from the government and whether board actions are appropriate in light of the numbers.
The federal budget proposed by the Trump administration for fiscal year 2018 calls for $1.59 billion to fund Medicaid in Puerto Rico, an increase of $1.24 billion versus the official Medicaid cap for the Commonwealth. The current fiscal plan, however, does not reflect either the historic levels of Medicaid funding (about $1.6 billion per annum) or the amount in the Trump proposal.
Our updated Beyond the Headlines PDF also provides details on subjects that are of interest to bondholders and members of the media alike. These include:
- The Commonwealth’s mixed record regarding debt payments
- The May decision of the federal oversight board to commence proceedings under Title III of PROMESA for the Commonwealth and certain other issuers of municipal debt
- The subsequent decision to commence Title III proceedings for PREPA, the Commonwealth’s electric utility, despite the frequently extended restructuring support agreement (RSA) between the utility and its forbearing bondholders, including the Oppenheimer Rochester funds
- Various other proposals and decisions by the governor and the federal oversight board.
Our work on behalf of shareholders is ongoing, and new court filings by assorted stakeholders suggest that plenty of work remains to be done. In addition to its fiscal and economic challenges, the Commonwealth sustained some damage during Hurricane Irma and is only partway through the Atlantic “hurricane season.”
Follow @RochesterFunds for more news and commentary.
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