Puerto Rico’s non-voting representative in the U.S. Congress is exploring changes to federal law that would allow the commonwealth’s municipal agencies to file for bankruptcy to restructure their debts, Bloomberg News reported yesterday. Pedro Pierluisi, whose formal title is resident commissioner, will ask congressional leaders about introducing a bill that would alter the U.S. Bankruptcy Code to let the agencies seek court protection from creditors, just as cities including Detroit and Stockton, Calif., did when they determined they were unable to meet financial obligations. “It would be logical and appropriate for the code to be amended to authorize public agencies and instrumentalities in Puerto Rico to file under chapter 9 to the same degree and extent as their counterparts in the 50 states,” Pierluisi, a Democrat, said yesterday, referring to the section of bankruptcy law that covers municipalities. States and territories are barred from filing for bankruptcy. Puerto Rico lawmakers took matters into their own hands last month, passing a Recovery Act that would allow some public corporations to negotiate with bondholders, potentially forcing them to accept unfavorable terms. The Puerto Rico Electric Power Authority, which supplies most of the island’s electricity and owes $8.6 billion, may be a candidate to reduce its debt load under the new law.
