A 2016 U.S. law that authorized federal oversight for Puerto Rico should not be amended to allow for the cancellation of unsecured debt, some of the island’s government officials said at a congressional hearing yesterday, Reuters reported. The House Natural Resources Committee, which oversees U.S. territories, is mulling changes to the PROMESA Act, which created a financial oversight board and a pathway for Puerto Rico’s 2017 bankruptcy filing. A discussion draft of amendments to the law included a proposal allowing Puerto Rico lawmakers to discharge debt not secured by collateral for repayment. Omar Marrero, Puerto Rico’s chief financial officer, said the move would increase future borrowing costs. “Instead of being able to fully access the bond market in the future, we will be limited to only the least-optimal mechanisms for funding future projects such as secured or high-interest bonds,” he said. Natalie Jaresko, the oversight board’s executive director, said that the debt-cancellation proposal “may make it harder and more expensive” for the board to restructure Puerto Rico’s existing debt through the ongoing bankruptcy process, leaving less money available for critical services for residents. In September, a proposal to restructure Puerto Rico’s core government debt, consisting of $35 billion of bonds and claims and more than $50 billion of pension liabilities, was filed in U.S. federal court by the board. Read more.
To watch a replay of the hearing, review the discussion draft of the proposed legislation and access written testimony, please click here.
