Legislation allowing Puerto Rico to restructure more than $70 billion in bondholder debt was approved by the House Natural Resources Committee on Wednesday by a 29-10 vote.
The Puerto Rico Oversight, Management, and Economic Stability Act would create a fiscal oversight board with exclusive authority to enact and enforce fiscal plans and reforms, with the overall goal of improving access to capital markets. That board would promote voluntary restructuring agreements with bondholders, with additional authority to adjust debts “in the best interests of creditors.”
The legislation would halt any litigation over debts, and create a firewall between constitutionally protected creditors and the $2 billion Puerto Rico Employees Retirement System, Hato Rey.
The bill also calls on the new board to conduct an independent analysis of the pension system to help evaluate “the fiscal and economic impact of the pension cash flows.”
The committee rejected an amendment that would have prevented Puerto Rico from taking any action to address the underfunded pension system until 120 days after that analysis, but Chairman Rob Bishop, R-Utah, said during committee debate on the bill that there might be additional changes before the bill is presented to the full House.
Mr. Bishop, whose committee has jurisdiction over U.S. territories, said the bill will ensure compliance with fiscal plans and fair treatment of investors. “This bill is Puerto Rico’s last and best chance to get on sound financial footing and put its economy on the path to recovery and prosperity,” Mr. Bishop said at the beginning of the session.