Legislation allowing Puerto Rico to restructure more than $70 billion in bondholder debt is on its way to the White House for President Barack Obama to sign, following Senate approval late Wednesday.
The White House supports the measure, which Treasury Secretary Jacob Lew helped negotiate, before a July 1 deadline to make $2 billion in debt payments. The House passed the bill on June 9.
Mr. Lew said in a statement after the Senate's 68-30 vote that the restructuring process created by the measure will allow Puerto Rico to adjust its debts “to a sustainable level,” but there is more work to be done. “While this bill stems the immediate crisis, Congress must redouble its efforts to promote Puerto Rico's long-term success,” Mr. Lew said.
The Puerto Rico Oversight, Management, and Economic Stability Act creates a fiscal oversight board with exclusive authority to enact and enforce fiscal plans and reforms, aimed at 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.” It will 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 new board will conduct an independent analysis of the pension system.
Puerto Rico Gov. Alejandro Garcia Padilla said in a statement that the legislation gives the commonwealth the tools to comply with obligations and payments while protecting it from lawsuits. “Today we take back our country; with the approval of PROMESA we begin to take our island from creditors and return it to the people,” he said.
