A proposed bill to give Puerto Rico's ailing public agencies a way to restructure debts under U.S. bankruptcy law is a "Wild West" solution that would likely hurt bondholders, an adviser for major investors argued in written testimony ahead of a key congressional committee, Reuters reported today. "Use of Chapter 9 by any of Puerto Rico's public corporations will cause more harm than good, for both millions of Americans who invested in Puerto Rico bonds and for the Commonwealth," according to prepared testimony from Thomas Mayer, a partner at Kramer Levin. Mayer represents funds managed by Franklin Municipal Bond Group and OppenheimerFunds Inc. in respect to their investment in $1.6 billion of bonds issued by Puerto Rico's electric utility, PREPA. PREPA is in dire shape, laden with about $9 billion in debt and already deep in restructuring negotiations with bondholders. The bill to give Puerto Rico's agencies the ability to file under chapter 9 of the U.S. bankruptcy code — used by cities such as Detroit, Michigan, and Stockton, California — was proposed by the U.S. territory's representative to Congress, Democrat Pedro Pierluisi. House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law will hold a hearing today at 11:30 a.m. to examine H.R. 870, the "Puerto Rico Chapter 9 Uniformity Act of 2015." Click here to view the prepared testimony and to watch the hearing.
