Guam Says "No" to Territorial Bankruptcy
Sharon Edmondson, Washington Legislative Team Member | February 17, 2016
In the continuing crisis in Puerto Rico, other US territories, Guam in particular, say borrowing costs for them could swell if Congress extends Chapter 9 bankruptcy protection to US territories as a way for Puerto Rico to reduce its $70 billion of debt.
Guam’s governor, Eddie Calvo’s argument is the same as the one made by some Senate Republicans and Puerto Rico investors, who say that retroactively changing the rules around the commonwealth’s bonds could disrupt the functioning of the $3.7 trillion municipal market.
The proposal is most pressing for the other four territories that issue bonds that are tax-exempt at the state, federal and local levels: Guam, America Samoa, Northern Mariana Islands and US Virgin Islands. Guam’s pitch is an attempt to avert the fate of American Samoa’s bond sale last month, which officials said came at a high penalty. Governor Calvo also sees Puerto Rico’s crisis as a chance to highlight unequal treatment of US territories apart from the Bankruptcy Code.