U.S. Senators Seek Bankruptcy Powers for Puerto Rico

WASHINGTON - Sens. Richard Blumenthal, D-Conn., and Charles Schumer, D-N.Y, plan to introduce a bill to grant Chapter 9 bankruptcy powers to public entities in Puerto Rico.

The bill would be a companion to legislation already introduced in the House by Pedro Pierluisi, the territory's non-voting member of Congress, Pierluisi said.

Gov. Alejandro García Padilla said Monday that the island's approximately $72 billion public debt is "not payable," spurring talks about possible avenues to achieve a comprehensive debt restructuring in an orderly way.

Unlike all 50 states, Puerto Rico lacks access to Chapter 9 bankruptcy powers, which would allow its public corporations to restructure their debts under court supervision. A local debt-restructuring law that would have given corporations similar powers is currently being appealed after a judge threw it out in February. Pierluisi's bill, H.R. 870, was introduced in the House in February, but has been stagnant since being referred to a subcommittee in March. Pierluisi released a statement Wednesday thanking the two senators for their work in getting a companion bill filed and expressed his hope the bill would receive "careful consideration" in the Senate.

"H.R. 870 does not require the federal government to spend a single dollar. It would simply grant the government of Puerto Rico a power that all state governments have, namely the ability to authorize one or more of its insolvent public enterprises to work out a path forward with its creditors under the supervision of a federal bankruptcy judge based on federal substantive and procedural law," Pierluisi said. "It is clearly the best course of action for both Puerto Rico and its creditors. The alternative is a legal no-man's land that benefits neither Puerto Rico nor those who have loaned the territory money."

Blumenthal told Politico that he and Schumer have received "strong interest" on the bill from both Democrats and Republicans.

The White House expressed support for congressional consideration of granting Chapter 9 powers to Puerto Rico earlier this week. Josh Earnest, the White House press secretary, told reporters in a June 29 briefing that there are "strong merits to having an orderly mechanism for Puerto Rico to manage the financial challenges of its public corporations if needed."

"We've urged Congress to take a close look at this particular issue," Earnest said. "A Chapter 9 scenario that would be available to all of the 50 states is not one that's currently available to Puerto Rico, and that's something that only Congress can change."

A staffer in Blumenthal's office said the two senators are hoping to get the bill introduced in the next few weeks.

 

 

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