Puerto Rico Gov. Pedro Pierluisi opposes a debt restructuring plan because of its pension reforms.
The governor filed a limited objection to the restructuring plan in the federal court overseeing Puerto Rico's bankruptcy case. The next hearing on the plan is July 13.
Mr. Pierluisi has supported debt restructuring, but questioned the need for pension benefit cuts that are part of the restructuring plan coordinated by the Fiscal Oversight & Management Board. On June 11, he signed into law a bill preventing future cuts to pension benefits. In a news release, the governor said there is "no fiscal or legal justification" for pension cuts, and that he hoped the board would reconsider them.
In a separate statement responding to his objections, the oversight board said it "does not want to cut pensions. Retirees in Puerto Rico are not to blame for the situation the commonwealth finds itself in. But public retirees are considered unsecured creditors under law and their treatment under the Plan of Adjustment will have to be approved by a court."
The restructuring plan ensures that more than 70% of retirees would not experience pension cuts and it protects future pension funding by establishing a pension reserve trust. It also provides a mechanism to restore pension cuts, the oversight board said.
Implementing the pension reform provisions of the restructuring plan does not require legislation or other governmental action.