The United States Congress passed a “rescue law” for Puerto Rico on Wednesday which will include federal oversight of the country’s credit restructuring. The law was criticized by Vermont Senator Bernie Sanders and includes a provision for the country paying hundreds of millions of dollars in administrative fees back to the United States.
The bill is called the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) and is being pushed by President Barack Obama to be signed before July 1 when the country is due to pay $1.9 billion in debt payments.
Payments will be missed, and the country is unable to honor all of its debts, leading to defaulting for the fourth time this year.
On July 1st,the country will pay $780 million to General Obligation (GO) bonds, which are required to be paid before all other debts. The country is expected to default on at least some of the payment owe to the GO for the first time.
The control board will allow for insurers to speak to financially responsible members that will be able to help alleviate the worries of insurance companies directly exposed to Puerto Rican debt.
Hundreds of millions of dollars of the debt payment owed on July 1 is insured and will have a negative impact on insurance companies that backed the debt.