A company has continuing economic decline. Management makes poor decisions. Too much debt is issued, and new debt is used to fund annual budgets. A weather event damages critical assets. Tax advantages enjoyed for many years start to expire. Healthcare costs continue to grow and take a larger share of revenues. The revenue base continues to decline. Unfunded pension liabilities grow. Investors start souring on the company’s prospects. Credit agencies downgrade to junk status. Debt becomes untenable, and the company files for bankruptcy.

Sounds like some of our clients, right?

But what if the “company” is the U.S. territory of Puerto Rico?

Starting with over $74 billion in bond debt and $49 billion in unfunded pension liabilities, the bankruptcy filing was the largest municipal bankruptcy in U.S. history. (For those of you saying, “But this wasn’t a Chapter 9 bankruptcy, but was rather governed under a new form of bankruptcy!” you’d be right.) After nearly five years, Puerto Rico formally exited bankruptcy on March 15, 2022.

This issue of the JCR explores many topics related to the Puerto Rican debt crisis. We will learn more about how Puerto Rico got in trouble, the options considered, and the unique challenges for restructuring an island commonwealth. An aging population, social unrest, and infrastructure destruction by Hurricane Maria all contributed to the commonwealth’s fall.

As noted, this crisis involved some new tools put in place by Congress, specifically a new law, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), that appointed an oversight board to control the commonwealth’s budget and provided tools for the territory to enter a bankruptcy-like restructuring process. This provided additional tools, including an automatic stay, but also made the recovery more complex as the public began to feel the impacts of the restructuring changes and, in some cases, social unrest was the result.

To unpack this, we’ve assembled a great team of experienced TMA professionals to provide you with their insights into the crisis. TMA members jumped at the chance to get involved in the Puerto Rican restructuring given our unique skills and expertise (although I’m sure the island weather was not a motivator at all).

I hope you learn as much as I did about this very interesting municipal bankruptcy, as it will be fascinating to watch how it plays out in coming years as the plan is implemented.

For those of you staying closer to home, I hope to see you at one of our TMA Global or regional events in 2022. As the world reopens, there will be great opportunities to network and rekindle relationships in person. While I am thankful for the work of TMA to keep us connected during these trying times, I am excited to see you at an upcoming TMA event.

Save the dates to be in Boston November 1-4, 2022, for the TMA Annual Conference taking place at the Westin Boston Waterfront Hotel. And while you are at it, consider getting more involved with your local chapter, a conference planning committee, or even becoming an event sponsor. There are many ways to get and stay involved with TMA.

Thanks, stay safe, and be #TMAProud.

Best Regards,

Matthew English, CTP
TMA Global Chair