Congress will soon decide whether to shield cash-strapped Puerto Rico from investor lawsuits while the island maps a plan to resolve its financial crisis — an intervention that could divide some lawmakers and creditors, Reuters reported on Saturday. Republican leaders who control Congress are due within days to outline a Puerto Rico rescue plan that would restructure its $70 billion debt outside bankruptcy and confront a 45 percent poverty rate and a looming health crisis as the Zika virus spreads. Republican leaders agree with the Obama administration that an independent review board should mediate disputes between creditors and Puerto Rico officials, but lawmakers disagree over whether investors must put lawsuits on hold in the meantime. "I think we need to keep the pressure up," said Rep. Jeff Duncan (R-S.C.), who opposes a freeze, or stay, on litigation. "I would not be for allowing a stay," said Duncan, who has a vote on the Natural Resources Committee that is drafting a rescue plan. Republicans insist the Puerto Rico rescue is anything but a bankruptcy. Opening the door to a Puerto Rico bankruptcy would be "ill-conceived and would undermine the rule of law" Republicans argue in a written outline of the Puerto Rico rescue plan seen by Reuters on Friday. But while a stay on litigation "is a highly complex and sensitive component" of rescue, the hold on lawsuits is necessary, according to the outline, which envisions a five-member oversight board auditing Puerto Rico's finances and helping mediate creditor disputes. Read more.
In related news, House Speaker Paul Ryan promised that House Republicans would have a plan to help Puerto Rico deal with its $70 billion debt by the end of March, yet some island officials are finding the emerging draft difficult to swallow, Bloomberg News reported yesterday. The bill being written would create a five-member board that will hire experts to oversee a process for Puerto Rico to restructure its debts, which threaten to cripple the commonwealth’s finances this spring. For Puerto Rico Governor Alejandro Garcia Padilla and other island officials, handing over financial control to a federally appointed panel will be difficult. Pedro Pierluisi, Puerto Rico’s Democratic delegate in Congress, is already raising concerns, saying he has several remaining conditions. “If they are not met, the bill will not become law,” Pierluisi said in a statement on Saturday. “And, if a bill does not become law, Puerto Rico and its creditors will almost certainly go over a cliff — together — this summer.” Still, he couched his conditions with an insistence he can work to make modifications with his Republican and Democratic colleagues “to create a final product that is a net positive for the people of Puerto Rico.” Read more.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
