Sunday, December 20, 2015

Saving Puerto Rico (from itself): Review of Puerto Rico debt and politics by topics

Puerto Rico Review - 12.20.15

Inside the Billion-Dollar Battle for Puerto Rico’s Future - NYTimes


AGP will not run

Puerto Rico governor says will not seek re-election | Reuters
Puerto Rico’s Embattled Governor Says He Won’t Run for 2nd Term - The New York Times
Puerto Rico governor says will not seek re-election - Business Insider
Gov. García Padilla says he won't seek reelection - Caribbean Business
P.R. governor announces he will not seek 2nd term | News is my Business
Latin American Herald Tribune - Puerto Rico Governor Won’t Seek Re-Election
Mensaje Gobernador Alejandro García Padilla - YouTube
Puerto Rico's Embattled Governor Says...
Puerto Rico's Embattled Governor Says...
Alejandro Garcia Padilla - Google Search
News - Alejandro Garcia Padilla - Google Search

Bernier plans to run

Bernier plans to announce Puerto Rico governor bid Wednesday - source | Reuters
Bernier plans to announce Puerto Rico...

Hernandez Anaudi affair and corruption probe

FBI Arrests 10 in Puerto Rico Corruption Case | The Bond Buyer
Puerto Rico Businessman With Ties to Governor Indicted in Probe - Bloomberg Business
Latin American Herald Tribune - FBI Arrests Treasurer of Puerto Rico Ruling Party
Hernandez Anaudi federal arrest for corruption in P. Rico | El Diario NY
García Padilla denies foul play amid ongoing federal investigation - Caribbean Business
Federal authorities crack down on government corruption scheme - Caribbean Business
Conferencia de Prensa Arresto de Anaudi Hernández - YouTube
Alejandro Garcia Padilla federal corruption probe - Google Search
News - Alejandro Garcia Padilla federal corruption probe - Google Search
Anaudi Hernández Pérez - Google Search
anaudi hernandez puerto rico - Google Search

PR Political corruption issues

Puerto Rico Governor's Exit Belies Fecklessness of Political Class
How to Put a Stop to Puerto Rico's Political Corruption
3 Puerto Rico mayors accused of illegal salary raises - Yahoo News
corruption in puerto rico - Google Search
corruption in puerto rico police - Google Search
puerto rico police corruption - Google Search
corruption in puerto rico politics - Google Search
corruption in puerto rican government - Google Search
political parties in puerto rico - Google Search
two political parties in puerto rico - Google Search
political party strength in puerto rico - Google Search

Debt Issues

Puerto Rico avoids second default, but future payments uncertain | Reuters
Puerto Rico’s Governor Says Island’s Debts Are ‘Not Payable’ - The New York Times
Puerto Rico Begins Choosing Which Debt Payments to Make - The New York Times
Behind Puerto Rico’s Woes, a Broadly Powerful Development Bank - The New York Times
Creditors Signal Potential Support for Overhauling Puerto Rico Debt - The New York Times
Puerto Rico takes dramatic step to avoid default - Yahoo Finance
An emergency financial control board for Puerto Rico - AEI
Puerto Rico poised to miss another debt deadline as financial crisis rages on | World news | The Guardian
Puerto Rico Governor: It's Time For Bondholders To Share Our Pain
Puerto Rico risks creditor ire by...
Will Congress Let Chaos Prevail? Countdown to Chapter 9 for Puerto Rico : CNE – Centro Para Una Nueva Economía – Center for a New Economy
What A Debt Default Would Look Like Without Chapter 9 (related documents) : CNE – Centro Para Una Nueva Economía – Center for a New Economy
Puerto Rico and Congress: Rhetoric and Facts : CNE – Centro Para Una Nueva Economía – Center for a New Economy
Latino Rebels | The Money Behind the U.S. Colony of Puerto Rico
Puerto Rico Makes Bond Payments, But...
CADTM - Puerto Rico must escape the debt trap
The human impact of the Puerto Rico debt crisis | TheHill
Bailing out Puerto Rico's bondholders | TheHill
Puerto Rico's Broke, So How Did It Make a $355M Debt Payment? - TheStreet
Solving Puerto Rico's $70 Billion Debt Problem - Bloomberg Business
Puerto Rico Makes Bond Payments, But...
Puerto Rico is in a 24-hour debt showdown again - AOL
Hedge funds must be held accountable in Puerto Rico crisis | TheHill
Gonzalez: Puerto Rico debt aid...
Puerto Rico's Bankruptcy Case: If Something Can't Go On Forever Then It Won't - Forbes
Treasury is right about Puerto Rico debt | TheHill
WORLD | The street-level impact of Puerto Rico’s looming default | Marvin Olasky | Dec. 2, 2015
How Warming U.S.-Cuban Relations Could Spell Trouble For Puerto Rican Muni Bonds - Forbes
How Hedge Funds Are Pillaging Puerto Rico

AGP and Debt

Puerto Rico's governor tells US Senate the island cannot repay debts | World news | The Guardian
García Padilla heads to DC in last ditch effort - Caribbean Business
Puerto Rico Governor loses support of mayors as debt crisis bites | Reuters
Alejandro Garcia Padilla and debt haircuts - Google Search
Alejandro Garcia Padilla and Creole bankruptcy law - Google Search
Alejandro Garcia Padilla and puerto rican nationalism - Google Search
Alejandro Garcia Padilla as designated fall guy - Google Search
Fall guy - Wikipedia, the free encyclopedia
alejandro garcia padilla - YouTube
Alejandro Garcia Padilla and debt haircuts - YouTube
Gobernador ofrece detalles sobre su visita a Washington DC. - YouTube
Conferencia de prensa: Alejandro García Padilla - YouTube

Ingrid Vila Biaggi

Puerto Rico Governor’s recently-appointed Chief of Staff - Lexology
Before a grand jury Ingrid Vila | The new day
Ingrid Vila Biaggi - Google Search

PR Political Status

Puerto Rico's economic migrants escape to US mainland in search of stability | World news | The Guardian
puerto rico political status - Google Search
puerto rico political status 2015 - Google Search
puerto rico political status debate - Google Search
puerto rico political status poll - Google Search
puerto rican nationalism - Google Search
News - puerto rican nationalism - Google Search
puerto rican anti-Americanism - Google Search
CBS Puerto Rico - Former PR Governor Luis Fortuno on PR equality - YouTube

PR Report articles

Senate Proposal Calls for U.S. Control in Puerto Rico - Puerto Rico Report
Puerto Rico: In the Hands of Congress - Puerto Rico Report
U.S. Supreme Court Will Hear Puerto Rico’s Bankruptcy Appeal - Puerto Rico Report
Would Helping Puerto Rico Cost Too Much? - Puerto Rico Report
U.S. Congressional Committee Holds 5th Puerto Rico-Related Hearing of 2015 - Puerto Rico Report
Senate Finance Chair Asserts that Details on Puerto Rico’s Financial Health Needed Before Congress Can Act - Puerto Rico Report
Witnesses Announced for Senate Hearing Tomorrow on Puerto Rico's Fiscal Problems - Puerto Rico Report
U.S. Supreme Court Continues to Examine Puerto Rico's Recovery Act - Puerto Rico Report
Congressional Report Answers Questions About Puerto Rico Health Care - Puerto Rico Report
LULAC Endorses Statehood for Puerto Rico - Puerto Rico Report
Misunderstandings About Puerto Rico's Territorial Status - Puerto Rico Report

PR general issues and opinions

One rule for Puerto Rican prosperity: thou shall not steal | Conservative News and Views on Puerto Rico
puerto rico - Google Search
crime in puerto rico - Google Search
civil rights abuses in puerto rico - Google Search
civil rights abuses in puerto rico and fbi - Google Search
fbi in puerto rico - Google Search
fbi abuses in puerto rico - Google Search
las carpetas puerto rico - Google Search - 2
puerto rico secret files - Google Search
secret fbi puerto rico files - Google Search
puerto rico drug trade - Google Search
puerto rico drug war - Google Search
puerto rico violence - Google Search
puerto rico as drug hub - Google Search
crime in puerto rico drug trafficking money laundering and the poor - Google Search
puerto rico and drug cartels - Google Search
drug use puerto rico - Google Search
The Puerto Rico Monitor: 22 Individuals Charged With Drug Trafficking In Peñuelas
Drug Trafficking and the Caribbean | Young Public Intellectuals
Unbudging Partisanship: How it has exacerbated bad governance in Puerto Rico | Bedrosian Center | USC
Crooks: Live From Bayamón, NYCFC Gets...
Why Puerto Rico matters
Puerto Rico: Blame it on ‘commonwealth’ | TheHill
The US’s Long War Against Puerto Rico | Diario de Puerto Rico
This Is Why Puerto Rico Matters - Route Fifty
Why Puerto Rico matters
Puerto Rico's Rapture | Alejandro Manuel Sobrino
WORLD | Puerto Rico panic | Marvin Olasky | Dec. 26, 2015
Puerto Rico panic - World Magazine - Discussion on Topix
Deep in debt: Puerto Rico struggles to make cents
Puerto Rico Faces "Public Unrest" As Cash Crunch May Leave Government Workers Unpaid | Zero Hedge
Puerto Ricans fear for their health as federal cuts loom | WINK NEWS
Puerto Rico's community health centers face bleak future
Latino Rebels | What Happened in Puerto Rico on November 19, 1493?
Who Will Take the Helm of Puerto Rico's Sinking Ship?
How Cuba is, and isn’t, changing, one year after the thaw with the U.S. - The Washington Post
The Puerto Rico Monitor: Puerto Rico News Digest For December 15, 2015
RICHARD RAHN: Saving Puerto Rico - Washington Times

PR and Congress

GOP to Puerto Rico: 'Drop dead' - NY Daily News
As Puerto Rico Crisis Worsens, Congress Shows No Rush to Assist - Bloomberg Business
U.S. Senator Orrin Hatch: Lawmakers consider help for Puerto Rico | Reuters
Congress Offers Health Aid to Puerto...
Top Senate Republican Pushes Short-Term Aid for Puerto Rico - Bloomberg Business
P.R. gov’t crusades for Congress action - Caribbean Business
Pierluisi again urges for Congress action, blasts relationship with federal gov’t - Caribbean Business
Senate Republicans Introduce Bill for Puerto Rico Relief - The New York Times
What Lawmakers Should Do Before Considering Puerto Rico Bailout
The US May Finally Give Puerto Rico a Financial Lifeline. Here's What's Happening. | Mother Jones
Republicans Offer Puerto Rico a Helping Hand in Debt Crisis - Bloomberg Business
Congress Goofed. Puerto Rico Pays. - Bloomberg View
Puerto Ricans Rally On Capitol Hill: We're American Citizens - NBC News
Puerto Rico Bankruptcy Would Be Bad Idea, Senator Grassley Says - Bloomberg Business
Hatch: Details on Puerto Rico’s Financial Health Needed Before Congress Can Act
Puerto Rican Officials Say Congress’ Inaction Will Lead To ‘Humanitarian Crisis’ On The Island
Puerto Rico Faces a Grim Future – and the GOP Congress Could Not Care Less - The Ring of Fire
Press Conference: A call to action for Congress to act - YouTube
Puerto Rico's Member Of Congress Is So Frustrated, He'd Prefer Independence
Dems push gun control, Puerto Rico relief in budget talks | TheHill
Senate Squabbles Over Puerto Rican Debt Crisis | The Daily Caller

US politics and PR

Bankruptcy Contagion: Today, Puerto Rico... Tomorrow, Illinois - Breitbart
Have Puerto Ricans become the most important swing voters? - CSMonitor.com
Cuomo officials back in Puerto Rico as crisis looms | POLITICO
OP-ED CONTRIBUTOR: Let the U.S. Treasury Rescue Puerto Rico - The New York Times
As Florida's Puerto Rican Population Booms, Political Parties Move In | WEKU
Hillary Clinton Urges Puerto Ricans to Move to Florida to Vote
STEPHEN MOORE: Hillary Clinton's...
How Washington is holding Puerto Rico back - 2
Puerto Ricans Are Leaving in Droves – And Stirring Up the 2016 U.S. Election | Americas Quarterly
Have Puerto Ricans become the most important swing voters?
Clinton tells Puerto Rican voters 'we are a nation of immigrants' | Washington Examiner
STEPHEN MOORE: Hillary Clinton's...
Clinton Says Long-Term Solution Needed for Puerto Rico - Bloomberg Politics
puerto rico and us - Google Search
puerto rico and us relations - Google Search
puerto rico and us national security - Google Search

PR and US Supreme Court

Puerto Rico’s Debt Relief to Get Supreme Court Hearing - The New York Times
SCOTUS Will Hear Puerto Rico Restructuring Appeal | Fox Business
Supreme Court Agrees to Hear Puerto Rico On Debt Restructuring - NBC News
SCOTUS Will Hear Puerto Rico...

Pro-Bankruptcy views

The pitfalls of no Puerto Rico bankruptcy | TheHill
Give Puerto Rico Bankruptcy Protections - Bloomberg View

Anti-Bankruptcy views

Filing For Bankruptcy Isn't The Right Solution For Puerto Rico - Forbes
Misguided Plan For Puerto Rico Would Set Dangerous Precedent – Analysis | Eurasia Review

Anti-Debt payment and Leftist views

Cancel Puerto Rico’s debt! – Workers World
Prensa Latina News Agency - U.S Must Compensate Puerto Rico for Damages, says former Minister
Juan González on How Puerto Rico's Economic "Death Spiral" is Tied to Legacy of Colonialism | Democracy Now!
Puerto Rico's Odious Debt | Natasha Lycia Ora Bannan
Dictatorship in the Caribbean: the U.S. prepares a “Financial Control Authority” to rule over Puerto Rico | WAR AGAINST ALL PUERTO RICANS
Diaspora, Insular Expertise, and the War Over War Against All Puerto Ricans | La Respuesta
Gonzalez: Puerto Rico debt aid...

PR and Spain

Gov. Alejandro Garcia Padilla Travels To Spain, Seeking Investment Opportunities | Fox News Latino
To Hell with Statehood: Puerto Rican Activists Want to Reunite with Spain
First UBS, Now It’s Banco Santander in Hot Water Over Puerto Bond Fraud - The Ring of Fire
puerto rico and spain - Google Search
News - puerto rico and spain - Google Search
Alejandro Garcia Padilla and Spain - Google Search
puerto rico and spain - Google Search

PR as target of Foreign Intelligence

News - puerto rican nationalists in Moscow - Google Search
puerto rican nationalists in Moscow - Google Search
Russia Wants Texas and Puerto Rico to Secede - The Daily Beast - 2
The Cuban Connection in Puerto Rico; Castro's Hand in Puerto Rican and U.S. Terrorism - 2
puerto rico and russia - Google Search
puerto rico and russian intelligence - Google Search
puerto rico and russian intelligence - Google Search
puerto rico and cuba - Google Search
cuban intelligence capabilities - Google Search - 2
puerto rico and cuban intelligence - Google Search
The forgotten spy: Ana Belen Montes | TheHill
ana montes cuban spy - Google Search
cuban intelligence service - Google Search
puerto rico and venezuelan intelligence - Google Search
puerto rico and iranian intelligence - Google Search

Other articles

Puerto Rico Woos Home Buyers - WSJ
Condado Vanderbilt, Puerto Rico - hotel review | Travel | Lifestyle | London Evening Standard
Ricky Martin To Endorse Hillary Clinton Ahead Of Florida Event Aimed At Puerto Ricans - BuzzFeed News
Ricky Martin Praises First Same Sex Couple Adoption in Puerto Rico : Trending News : Latin Post
Walmart Sues Puerto Rico - Puerto Rico Report


Inside the Billion-Dollar Battle for Puerto Rico’s Future - NYTimes



Inside the Billion-Dollar Battle for Puerto Rico’s Future

1 Share
The money poured in by the millions, then by the hundreds of millions, and finally by the billions. Over weak coffee in a conference room in Midtown Manhattan last year, a half-dozen Puerto Rican officials exhaled: Their cash-starved island had persuaded some of the country’s biggest hedge funds to lend them more than $3 billion to keep the government afloat.
There were plenty of reasons for the hedge funds to like the deal: They would be earning, in effect, a 20 percent return. And under the island’s Constitution, Puerto Rico was required to pay back its debt before almost any other bills, whether for retirees’ health care or teachers’ salaries.
But within months, Puerto Rico was saying it had run out of money, and the relationship between the impoverished United States territory and its unlikely saviors fell apart, setting up an extraordinary political and financial fight over Puerto Rico’s future.
On the surface, it is a battle over whether Puerto Rico should be granted bankruptcy protections, putting at risk tens of billions of dollars from investors around the country. But it is also testing the power of an ascendant class of ultrarich Americans to steer the fate of a territory that is home to more than three million fellow citizens.
The investors with a stake in the outcome are some of the wealthiest people in America. Many of them have also taken on an outsize role in financing political campaigns in the aftermath of the Supreme Court’s 2010 Citizens United decision. They have put millions of dollars behind candidates of both parties, including Hillary Clinton and Jeb Bush. Some belong to a small circle of 158 familiesthat provided half of the early money for the 2016 presidential race.
To block proposals that would put their investments at risk, a coalition of hedge funds and financial firms has hired dozens of lobbyists, forged alliances with Tea Party activists and recruited so-called AstroTurf groups on the island to make their case. This approach — aggressive legal maneuvering, lobbying and the deployment of prodigious wealth — has proved successful overseas, in countries like Argentina and Greece, yielding billions in profit amid economic collapse.
The pressure has been widely felt. Senator Marco Rubio, whose state, Florida, has a large Puerto Rican population, expressed interest this year in sponsoring bankruptcy legislation for the island, says Senator Richard Blumenthal, Democrat of Connecticut. Mr. Rubio’s staff even joined in drafting the bill. But this summer, three weeks after a fund-raiser hosted by a hedge-fund founder, Mr. Rubio broke with those backing the measure. Bankruptcy, he said, should be considered only as a “last resort.”
And this past week, House Republican leaders said any financial rescue for Puerto Rico may not come until the end of March.
The fight over the island’s future is stretching from the oceanside neighborhoods of San Juan, where a growing number of wealthy investors and financial professionals have migrated in recent years to exploit generous tax breaks, to Capitol Hill. Their efforts are being closely watched by financial institutions, labor unions and policy makers on the mainland, where many ordinary investors own Puerto Rican bonds through mutual funds.
Some warn that Puerto Rico could be a test case for the rest of the country, paving the way for troubled states like Illinois to escape unsustainable debts.
Stephen J. Spencer, a restructuring expert representing Puerto Rico bondholders including some hedge funds, said letting the government renege on agreements with hedge funds and other investors would set a dangerous precedent, undermining the integrity of the bond market.
“It’s really a wealth transfer from the bondholders to the municipalities,” Mr. Spencer said.
Others fear a different precedent: A handful of wealthy investors, they argue, are trying to rewrite the social contract of an entire United States territory. Puerto Rican officials say they have already cut public services and slashed central government spending by a fifth to keep ahead of payments to the hedge funds and financiers.
“What they are doing, by getting all the resources for themselves, is undermining the viability of Puerto Rico as a commonwealth,” said Joseph E. Stiglitz, the Nobel Prize-winning economist. “They want their money now, and they want to get the rules set so that they can make money for the next 20 years.”

A Bet on Resurgence

Along Ashford Avenue in San Juan’s Condado district, newly renovated hotels gleam beside shops like Gucci and Cartier. Slightly to the west are new high-rise condominiums, known as WeCo, or West Condado, by an enterprising real estate agent originally from Manhattan. Still farther west, not far from the Capitol in Old San Juan, a new development named the Paseo Caribe makes a more explicit pitch to potential buyers: “The Puerto Rico Advantage: Sun, Sand and Zero Taxes,” the development’s website promises.
This was supposed to help solve Puerto Rico’s problems. The commonwealth has been in a depression for over a decade. Pharmaceutical companies and manufacturers have fled the island, followed by young Puerto Ricans looking for jobs, draining the island’s work force and tax base. Forty percent of the island’s residents live in poverty.
Three years ago, in a bid to lure financial services firms and other employers, Puerto Rico’s governor at that time, Luis Fortuño, a Republican, signed laws intended to turn the island into a domestic tax haven. Americans who relocated to Puerto Rico, spent at least half a year there and brought their company with them would pay no federal income or capital gains taxes.
Private-equity magnates, hedge funds and investment advisers began moving to the island. They settled in Condado and a handful of coastal enclaves like the Dorado Beach Resort, where the billionaire investor Toby Neugebauer, who provided $10 million to the presidential campaign of Senator Ted Cruz of Texas, bought a home.
John Paulson, the hedge fund investor and leading Republican donor, snapped up resort properties and fading resort hotels, betting on a resurgence. Puerto Rico, Mr. Paulson told an investor conference last year, would become “the Singapore of the Caribbean.” This spring, at his urging, the island even rented a booth at the hedge fund industry’s annual conference at the Bellagio casino in Las Vegas, where two attractive women pitched Puerto Rico’s charms to guests.
It was not the first time that Puerto Rico had turned to Wall Street for help. For decades, the island had been borrowing money to pay its bills. Puerto Rico’s bonds were particularly attractive to mutual funds because they were exempt from federal, state and local taxes in all 50 states. But in 2013, after the island’s general obligation bonds were downgraded, they caught the attention of a different sort of investor: hedge funds specializing in distressed assets.
These funds began buying up the debt at a steep discount, confident that this was a bet they could not lose. Not only were the bonds guaranteed by the Puerto Rican Constitution, but under a wrinkle of federal law, the island’s public corporations and municipalities — unlike those of the 50 states — do not have bankruptcy as a recourse.
When the investment bank Lazard hosted a discussion for investors on Puerto Rico in October 2013, so many people showed up that some had to stand. By the next spring, as the island’s economic situation worsened, virtually no one else was willing to lend to Puerto Rico.
A round of spending cuts and tax increases by Gov. Alejandro García Padilla, the Democrat who succeeded Mr. Fortuño, had not produced enough cash to keep up with the island’s earlier debts. A prospectus circulated for the March 2014 bond offering — which raised the $3.5 billion that Mr. García Padilla hoped would buy time for a recovery — warned in boldface type of “significant risks.”
Nevertheless, some of the biggest hedge funds kept buying, drawn by the promise of what was a 20 percent return, based on the interest rate coupled with the tax exemption. Mr. Paulson’s firm purchased bonds in March 2014, as did Appaloosa Management, founded by David Tepper; Marathon Asset Management; BlueMountain Capital Management; and Monarch Alternative Capital, said Puerto Rico officials involved in the sale.
The recovery never arrived. The $3.5 billion ran out. And Puerto Rico now owes its creditors in excess of $70 billion, a bigger debt load than all but two states. As much as a third of it is owed to hedge funds, according to some estimates.

The Bankruptcy Option

Early this year, with Puerto Rico’s economic outlook darkening, the island’s nonvoting member of the House of Representatives, Pedro R. Pierluisi, made what he thought was a modest proposal.
He introduced a bill that would change federal law to allow Puerto Rico’s struggling municipalities and public corporations, such as the island’s power authority, to declare bankruptcy. It would affect only about a third of the island’s debt, Mr. Pierluisi told Republican colleagues in Congress. It would also give Puerto Rico the same right as most states and leverage against creditors — so-called Chapter 9 bankruptcy protection. And it would cost taxpayers nothing.
Republicans in the House seemed receptive, as were some conservative groups. Even some of Puerto Rico’s other creditors liked the idea: If public corporations could shed some of their debt, it would free up more money to repay other bondholders. (The power authority’s financial troubles were being felt on the island, and not only by locals: Last summer, one of Mr. Paulson’s luxury hotels lost electricity, briefly forcing the use of a backup generator.)
Mr. Blumenthal was an enthusiastic supporter of the bill. Eager for a Republican co-sponsor, his staff turned to Mr. Rubio. One of three Latino members of the Senate, Mr. Rubio had won a large portion of Florida’s Puerto Rican vote in his 2010 race, and he was now about to announce his presidential campaign.
“We were given to understand by his staff that they were very interested in the bill and in fact were going to co-sponsor it,” Mr. Blumenthal said in an interview. Puerto Rico’s government officials also believed Mr. Rubio intended to support the legislation.
In the weeks that followed, the staffs of the two senators worked together on the legislation. “To give them credit, his team made contributions to the substance of the bill,” Mr. Blumenthal said.
But opponents were organizing against the measure, led by firms that owned debt from Puerto Rico’s power authority, according to federal lobbying records and other documents. Among them were two mutual funds — Oppenheimer Funds and Franklin Templeton — and hedge funds, some specializing in distressed debt: the D.E. Shaw Group and Angelo Gordon, along with Marathon and BlueMountain.
The hedge funds were among the largest in the world, with a combined tens of billions of dollars under management. Some of their founders and principals were also donating large sums in the presidential campaign. David E. Shaw of D.E. Shaw has given more than $800,000 to Mrs. Clinton and groups supporting her campaign. (Mrs. Clinton has called on Congress to pass the bill.) John Angelo of Angelo Gordon has put a quarter of a million dollars behind Gov. Chris Christie of New Jersey. And Richard Ronzetti, a partner at Marathon, has given $30,000 to groups linked to Mr. Bush.
Proponents of the bill mounted their own campaign, recruiting island businesses, bankruptcy experts and groups like Americans for Tax Reform, which argued that forgiving some of the debts would be better than plowing additional federal money into the island. Mr. García Padilla’s government hired SKD Knickerbocker, a public-affairs firm with close ties to the White House.
But the hedge funds hit upon a novel lobbying strategy: Mobilize conservative opposition by attacking Mr. Pierluisi’s bill — and by implication any broader bankruptcy attempt by the island — as a “bailout.” Because allowing the island to restructure its debt would cost their investors money, the funds argued, it was no different from the much-reviled taxpayer-funded bailout of the big banks after the financial crisis in 2008.
Puerto Rico could not now gain access to bankruptcy protections that it had not been entitled to when it borrowed the money, the funds argued. And, they suspected, there was still revenue hiding within the island’s opaque books, as well as cuts to be made to its oversize bureaucracy.
In a letter circulated to Republican staff members in February and obtained by The New York Times, representatives for BlueMountain, a $22 billion firm headquartered on New York’s Park Avenue, warned that the bill would put the bondholders at a disadvantage in any fight over Puerto Rico’s debt. Bankruptcy, they said, would inevitably prioritize those with pension claims over the island’s creditors, as had been the case when Detroit declared bankruptcy in 2013.
“Chapter 9 proceedings bail out Puerto Rico on the backs of the very bondholders Congress incentivized to invest in Puerto Rican municipal bonds,” they wrote.
Reaching out to lawmakers and to Republican presidential candidates, the financial firms quickly recruited allies. Tea Party groups, usually the harshest critics of Wall Street lobbyists, joined the fray.
The bill was “nothing but a backdoor, taxpayer-funded bailout for Puerto Rico,” Jenny Beth Martin, the national coordinator of the Tea Party Patriots, wrote in a March letter to the House Judiciary Committee. (Asked in an interview to identify the taxpayer funds at risk in the bill, Ms. Martin said, “I don’t know that I can answer that.” She added: “It’s more bailouts for bad decisions, expecting us to help take care of things that we should not be responsible for.”)
The pressure put Mr. Rubio in an awkward position. Tea Party activists had helped elect him in 2010, wealthy Wall Street donors had embraced him as a rising star in the years since, and he was now entering an intense Republican presidential primary campaign against better-credentialed conservatives.
When it came time to introduce the legislation on the Senate floor in July, Mr. Rubio held off. “We delayed the actual formal introduction of the bill while we were waiting for a final answer from Senator Rubio, and at some point, we said: ‘We need to go. Does he want to be a part of it, or does he want us to go ahead without him?’” Mr. Blumenthal recalled. “The answer we got was, go ahead without him. We never learned why.”
In September, on the eve of a campaign visit to Puerto Rico, Mr. Rubio abandoned the idea entirely In an essay on the website Medium and in Puerto Rico’s largest daily newspaper, he wrote that bankruptcy should be considered only as a “last resort” if the island first took “significant steps to fix its budget and economic mess,” echoing a refrain among Republicans in Congress.
Mr. Rubio’s move was welcome news for bondholders, some of whom have supported his presidential campaign. Monarch’s founder, Andrew Herenstein, co-hosted two fund-raisers for Mr. Rubio’s presidential bid, one over the summer in the Hamptons, the other in Manhattan in October. A spokesman for Mr. Herenstein declined to comment.
A spokesman for Mr. Rubio said his views on the legislation were unrelated to campaign donations. "Given Marco’s interest in Puerto Rico issues, our office did the due diligence of reviewing the bankruptcy bill, as well as other possible solutions, and meeting with stakeholders," he said. "Marco ultimately decided not to support it, because he believes Puerto Rico’s leaders should first pursue other fiscal reforms with Chapter 9 being a last resort."

Unsustainable

In June, 16 months after the hedge funds had come to Puerto Rico’s rescue, Governor García Padilla rattled trading floors around the country. Puerto Rico, he said, was in a “death spiral.” It could no longer pay its debts.
Only weeks earlier, his administration had hired as an adviser the retired judge who had overseen Detroit’s bankruptcy. Puerto Rico had also released a report by a former chief economist of the World Bank, warning that its debt load was unsustainable.
In October, amid the impasse over Mr. Pierluisi’s bill, the Obama administration weighed in with an even more ambitious plan. It proposed to create a new form of bankruptcy for United States territories, which would restructure all of the island’s debt — and put all of the financial firms’ investments at risk.
Relations between Mr. García Padilla and the hedge funds he had once courted soured, and the investors intensified their fight. Several more hedge funds hired Washington lobbyists. Puerto Rico, now looming as potentially the biggest government bankruptcy in American history, the lobbyists warned, could carve a path for cities and states around the country to escape their debts without reforming their governments.
Hedge funds commissioned their own economic study of the island’s finances, which concluded that further cuts to public spending, in particular to education and health care, would allow the island to keep up.
Some of the investors also tapped into an existing network of conservative nonprofit groups that in recent years has become a major conduit for moving large, anonymous contributions into lobbying and campaign activity.
This fall, a conservative group called the 60 Plus Association, based in Alexandria, Va., unleashed a wide-ranging media and lobbying effort against a restructuring and Governor García Padilla, whom it accused of “manufacturing a crisis” and trying to “extort” money from Congress.
The group cast the victims of a bankruptcy as ordinary Puerto Ricans and retirees who owned government-issued bonds. In November, 60 Plus recruited a group of these individuals, calling them “Main Street Bondholders,” for a news conference in San Juan.
“Do these folks look like vultures to you?” asked Matthew Kandrach, the vice president of 60 Plus, who apologized for not speaking Spanish. “I want the governor to see these faces.”
Exactly who the group was speaking for was unclear. Puerto Ricans own less than a fifth of the island’s debt, according to government officials. And while 60 Plus claims to represent millions of seniors, most of the group’s revenue comes from a few large, anonymous contributions, according to its most recent tax return.
Two Republicans briefed on the arrangement said 60 Plus had been recruited by the DCI Group, a Republican public relations firm that specializes in “AstroTurfing” — orchestrated lobbying campaigns designed to look like grass-roots efforts. DCI’s clients include the hedge fund BlueMountain Capital, which has been one of the most aggressive opponents of federal intervention in Puerto Rico.
DCI declined to comment. Asked about the arrangement, Mr. Kandrach responded: “When it helps us better serve and represent our seniors, we are proud to partner with firms such as DCI who offer valuable logistical support to getting our message out.”
Hedge fund executives and their allies also pressed their case in private meetings with key members of Congress and their staffs. The chairman of the Senate Finance Committee, Utah’s Orrin G. Hatch, met with a representative for funds owning general obligation bonds, as well as with Puerto Rico officials. Several firms with investments in Puerto Rico have been among the leading sources of donations to Mr. Hatch’s campaign and leadership PAC in recent years.