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UPDATE 2-U.S. aid to Puerto Rico seen topping $30 billion -congressional aide
September 28, 2017 / 5:55 PM / 19 days ago

UPDATE 2-U.S. aid to Puerto Rico seen topping $30 billion -congressional aide

(Adds information on debt, creditors. Changes dateline to WASHINGTON/SAN JUAN, Puerto Rico)

By Richard Cowan and Nick Brown

WASHINGTON/SAN JUAN, Puerto Rico, Sept 28 (Reuters) - Puerto Rico is likely to need far more than $30 billion in long-term aid from the U.S. government for disaster relief and rebuilding efforts following Hurricane Maria, a senior Republican congressional aide said on Thursday.

The aide, who asked not to be identified, said that while Congress has quickly fulfilled requests from the administration of President Donald Trump for disaster assistance, there are concerns that government agencies have not acted quickly enough in response to the storm and bureaucratic requirements may have slowed work of the Department of Defense and other offices.

Disaster modeler Enki Research estimates damage to the island at $30 billion, with $20 billion in direct physical damage and $10 billion in economic impact.

The aide said that the Trump administration request for additional money could come late next week or the week after. “We are pushing earlier,” the aide said.

U.S. House of Representatives Speaker Paul Ryan said on Thursday that $6.7 billion in approved hurricane relief funding would be given to federal emergency officials in two days to help victims of three recent storms, including the most recent one that hit Puerto Rico.

“A huge capital injection will happen in two days, so the resources are there,” Ryan told reporters, adding that lawmakers will quickly act on the Trump administration’s requests for hurricane relief for the U.S. territorial island.

Risk-modeling firm RMS said on Thursday that it estimated insured losses from Hurricane Maria of $15 billion to $30 billion, with Puerto Rico and Dominica suffering the most destruction.

Earlier this week, rival modeling firm AIR Worldwide estimated insured losses for Maria, which hit the Caribbean last week, of $40 billion to $85 billion. They said Puerto Rico alone accounts for 85 percent of the loss.

The hurricane has raised questions about how much of a role the federal government plays in solving Puerto Rico’s crisis and whether creditors would give any relief to the island, weighed down by $72 billion in debt.

Trump said on Monday that Puerto Rico’s billions of dollars of debt to Wall Street and banks “must be dealt with.”

DEBT FORGIVENESS UNLIKELY

Trump on Tuesday agreed to boost federal disaster assistance, ordering increased funding be made available to assist with debris removal and emergency protective measures. The question remains how large any package might be.

The White House does not think it needs to address restructuring the island’s debt in its next request for funding from Congress, Tom Bossert, the White House homeland security adviser, told reporters on Thursday.

Bondholders and investors have said that debt forgiveness would be unlikely as it could be politically difficult and lead to lawsuits. The more likely scenario would be that FEMA and the federal government extend to Puerto Rico aid that can be used to rebuild the island, while creditors continue to negotiate the underlying debt problems in bankruptcy.

A source familiar with Puerto Rico’s restructuring said that creditors will likely wait and see what the Federal government will do in terms of an aid package before deciding their course.

Anything that creditors do will likely come through mediation with the judges, that source said. The source said that there was no current pressure for debt forgiveness but any discussions over debt would have to be done in the context of a bankruptcy court.

On Wednesday, creditors of Puerto Rico’s bankrupt power utility PREPA said they had offered the utility some relief, with a $1 billion loan and a discount on a portion of the existing debt - although that got rejected by the island, which called it “not viable”.

A group of creditors holding COFINA debt, which is bonds backed by sales tax revenue, said in a statement on Tuesday that they hoped the island received “necessary humanitarian and governmental assistance” to strengthen the island’s infrastructure for the long term.

Since Puerto Rico filed the largest-ever U.S. government bankruptcy in May, creditor groups have litigated fiercely over who has first claim on the island’s limited cash. Specifically, holders of some $17 billion in so-called COFINA debt, backed by sales tax revenue, are locked in a lawsuit with owners of $18 billion in general obligation bonds who claim entitlement to all island revenues, sales tax included.

Under the fiscal turnaround blueprint approved by Puerto Rico’s oversight board in March, the island has just $800 million a year to service debt - a quarter of what it owes.

Mediated settlement talks are ongoing, but neither COFINA nor GO creditors have yet been willing to compromise with such little cash available.

Mediation surrounding the bankruptcy is in New York this week and will include mostly procedural items, said a source familiar with the restructuring. (additional reporting by Amanda Becker and Megan Davies; Editing by Jonathan Oatis and Lisa Shumaker)

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