Puerto Rico Gov. Ricardo Rosselló and his financial advisors are insisting that the Title III judge cannot review the amount of debt that Puerto Rico will pay in the next 10 years.
The governor said at a press conference Thursday that the Puerto Rico Oversight, Management, and Economic Stability Act is clear that the fiscal plan cannot be challenged in the court system.
The Puerto Rico Oversight Board filed a petition for Title III bankruptcy on Tuesday, as allowed in PROMESA.
The Puerto Rico Oversight Board’s certified fiscal plan specifies that there will be enough money to pay about 24% of Puerto Rico’s due debt through fiscal year 2026. This amount would only for what the board has defined as Puerto Rico government’s own debt and doesn’t cover the debt for its semi-autonomous entities and fully autonomous cities. The amounts to be paid for these other entities and cities will be handled through separate processes.
On Thursday Rosselló said his government has set aside an amount for debt payment and that the government will remain firm in paying no more than it.
On Friday a spokesman of Puerto Rico’s Fiscal Agency and Financial Advisory Authority explained that it was PROMESA section 106(e) that prohibits the Title III judge from changing the fiscal plan terms. This section reads, “There shall be no jurisdiction in any United States district court to review challenges to the Oversight Board’s certification determinations under this act.”
On Wednesday bond insurers Assured Guaranty and National Public Finance Guarantee filed a complaint under Title III with the U.S. District Court for Puerto Rico saying that the fiscal plan breaks PROMESA and U.S. and Puerto Rico laws. The insurers are apparently trying to draw a distinction between challenging the plan and challenging the certification of the plan.
While Title III was filed in the U.S. District Court for Puerto Rico, it will be handled by a judge who has been seated at the U.S. District Court for the Southern District of New York. On Friday U.S. Supreme Court Chief Justice John Roberts named Judge Laura Taylor Swain, of the latter court, to oversee the case.
Deciding on whether to accept the fiscal plan or to accede to the insurers’ arguments will be one of her key decisions.
