Alexandria, Va. — The cover article of the June ABI Journal details the recent series of legal, political and financial events that culminated in the commonwealth of Puerto Rico filing for bankruptcy on May 3. Starting with an examination of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), signed into law by President Obama on June 30, 2016, Cate Long of the Puerto Rico Clearinghouse (Rhinebeck, N.Y.) provides a comprehensive look at each step that led to this unprecedented bankruptcy case in her article, “Developing: Puerto Rico Enters Bankruptcy on May 3.” Prior to the enactment of PROMESA, Puerto Rico was barred from filing for bankruptcy to restructure its debts.
“Although modeled in part on the federal law that created an oversight board for the District of Columbia, PROMESA created an entirely new approach to righting the finances of the bankrupt territory and creating a framework for consensual debt negotiations and court-supervised restructuring,” Long writes. PROMESA’s Title III, for court-supervised debt restructuring, incorporated, by reference, various sections of the U.S. Bankruptcy Code. This provision, Long explains, is different than a chapter 9 municipal bankruptcy filing. “Unlike chapter 9 where the debtor retains control over its finances and proposes an adjustment plan, the Oversight Board controls any plan of adjustment under Title III, among other differences,” she writes.
Amid deteriorating negotiations between the Oversight Board, bondholders and Puerto Rico’s government, a May 1 deadline of a PROMESA stay on litigation expired, and multiple litigations were filed on May 2 by several creditors. On May 3, 2017, on Puerto Rico’s behalf, the Oversight Board filed for bankruptcy protection under Title III of PROMESA in the U.S. District Court for the District of Puerto Rico. “In Title III, the commonwealth will remain in possession and control of its property, and will continue to maintain its functions and provide services for the benefit of its citizens,” Long writes. “The commonwealth intends to propose a plan for the adjustment of commonwealth debts, although they claim that this intention will not exclude efforts to implement agreed-upon debt restructurings if possible.”
If you are a member of the press and wish to obtain a copy of “Developing: Puerto Rico Enters Bankruptcy on May 3” from the June edition of the ABI Journal, please contact ABI Public Affairs Manager John Hartgen at 703-894-5935 or jhartgen@abiworld.org.
For updated news and analysis of Puerto Rico's debt crisis, along with current docket filings in Puerto Rico's case, be sure to visit ABI's "Puerto Rico in Distress" webpage: http://www.abi.org/PR-crisis.
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