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UPDATE 2-Treasury says not in talks to undertake Puerto Rico obligations
October 15, 2015 / 1:05 AM / in 2 years

UPDATE 2-Treasury says not in talks to undertake Puerto Rico obligations

(Recasts with Treasury saying it met with governor; adds Treasury statement, quotes from U.S. representatives)

Oct 14 (Reuters) - The U.S. Treasury on Wednesday said it was not in talks to undertake any of Puerto Rico’s obligations, although it met the indebted U.S. territory’s governor to discuss the role the federal government has to play in assisting the island.

Puerto Rico, in recession for nearly a decade, is trying to restructure its debt, which amounts to $72 billion. The U.S. territory defaulted on debt in August.

The island has had an uphill battle having its concerns heard in Washington. The White House has said it would not bail out Puerto Rico while bills in Congress to extend U.S. bankruptcy laws to the U.S. territory have not progressed.

“The Administration has said repeatedly that it has no plans to provide a bailout to Puerto Rico, and it is inaccurate to suggest that Treasury is in talks to undertake any of Puerto Rico’s financial obligations,” a U.S. Treasury spokesperson said in an emailed statement.

The Wall Street Journal earlier reported that U.S. officials were discussing the issue of a “superbond” to help restructure the commonwealth’s debt, which would be administered by the U.S. Treasury Department and issued to existing bondholders in exchange for outstanding debt at a negotiated ratio.

Some creditors involved in Puerto Rico’s restructuring talks said they had heard rumors for some weeks of ideas to involve Treasury in a debt resolution but were unaware of any official proposal.

U.S. Representatives Luis Gutierrez and Nydia Velazquez, both Democrats, on Thursday said at a conference in Orlando, Florida, that they had advocated for the formation of a working group of cabinet-level officials to facilitate debt restructuring talks, but Treasury Secretary Jack Lew rejected the idea.

“They rejected the idea, but we also reject their position that they can’t do it,” Gutierrez said.

In a separate statement, the Treasury department said administration officials met Puerto Rico Governor Alejandro Garcia Padilla and discussed the need for congressional action such as extending access to an orderly restructuring process.

The Treasury spokesperson said that the administration had routinely presented a range of ideas to help the Commonwealth return to a sustainable economic path.

The Journal reported that the U.S Treasury would administer an account holding at least some of the island's tax collections, and funds in that account would be used to pay the holders of the superbond. It would need to clear high political hurdles to become a reality, the Journal reported. (on.wsj.com/1QtHEju) (Reporting by Rosmi Shaji in Bengaluru, Megan Davies in New York and Nick Brown in Orlando, Fla.; Editing by Leslie Adler)

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