Reps. Serrano, Velázquez Send Letter to House and Senate Judiciary Committee Chairmen and Ranking Members Urging them to Pass Puerto Rico Chapter 9 Legislation

Washington, DC – New York Representatives of Puerto Rican descent José E. Serrano and Nydia Velázquez sent a letter this week to the House and Senate Judiciary Committee Chairmen and Ranking members urging them to mark up and pass H.R. 870/S.1774, the Puerto Rico Chapter 9 Uniformity Act. Last month, Puerto Rico’s government announced its inability to pay its debt, totaling around $73 billion. The bill, introduced by Resident Commissioner Pedro Pierluisi in the House, along with Senators Schumer and Blumenthal in the Senate, would allow the government of Puerto Rico to restructure its debt under Chapter 9 of the Bankruptcy Code like states are allowed to.

“As you know, Chapter 9 of the Bankruptcy Code allows states to enact state laws enabling insolvent municipalities- including public corporations- to file for bankruptcy, if necessary.  For reasons that are not clear, Puerto Rico was not included in the original legislation authorizing Chapter 9.  HR. 870/S. 1774 would simply remedy this oversight, and authorize Puerto Rico to have the same power as states.  Absent that authority, Puerto Rico is faced with a difficult situation in which investors, insurers, the public entities, and other interested parties are forced to negotiate without an unbiased arbiter to oversee the proceedings and force the difficult decisions that may be necessary,” the members wrote.

“To be clear, we are not asking that Puerto Rico receive anything different than what any other part of our nation receives.  We simply ask that they be given the same tools that every state has to address these problems.  Without these tools, Puerto Rico, and its public corporations, will continue to engage in a complicated, multi-sided negotiations process without a clear set of guidelines or the guarantee of an unbiased arbiter- both hallmarks of the federal bankruptcy process.  It is likely that any private resolution to these issues will be challenged in court, but not in front of our nation's issue experts on these issues- federal bankruptcy judges.”

FULL TEXT OF THE LETTER:
 

Dear Chairman Grassley, Chairman Goodlatte, Ranking Member Leahy, and Ranking Member Conyers,

We write to express our ongoing concern with the economic situation in Puerto Rico, and to urge you to take urgent action to mark up and pass H.R. 870/ S. 1774, the Puerto Rico Chapter 9 Uniformity Act.  As Members of Congress of Puerto Rican descent, we strongly believe that this is an important and vital step in addressing the ongoing economic crisis in Puerto Rico.

Last month, the Governor of Puerto Rico announced that it could not pay its debts, which total some $73 billion.  A significant portion of this debt is held by three public corporations- the Puerto Rico Public Finance Authority, the Puerto Rico public electric utility (PREPA), and Puerto Rico's Water and Sewer Authority.  In total, these public corporations hold approximately $20 billion of Puerto Rico's debt.  And all three have significant upcoming payments that they may be unable to make absent serious concessions on the part of the bondholders.

As you know, Chapter 9 of the Bankruptcy Code allows states to enact state laws enabling insolvent municipalities- including public corporations- to file for bankruptcy, if necessary.  For reasons that are not clear, Puerto Rico was not included in the original legislation authorizing Chapter 9.  HR. 870/S. 1774 would simply remedy this oversight, and authorize Puerto Rico to have the same power as states.  Absent that authority, Puerto Rico is faced with a difficult situation in which investors, insurers, the public entities, and other interested parties are forced to negotiate without an unbiased arbiter to oversee the proceedings and force the difficult decisions that may be necessary.

To be clear, we are not asking that Puerto Rico receive anything different than what any other part of our nation receives.  We simply ask that they be given the same tools that every state has to address these problems.  Without these tools, Puerto Rico, and its public corporations, will continue to engage in a complicated, multi-sided negotiations process without a clear set of guidelines or the guarantee of an unbiased arbiter- both hallmarks of the federal bankruptcy process.  It is likely that any private resolution to these issues will be challenged in court, but not in front of our nation's issue experts on these issues- federal bankruptcy judges.

While this bill cannot solve all of Puerto Rico's financial problems, it is an important step in the right direction.  Puerto Rico cannot wait any longer for this important flexibility- we urge you to mark up and pass this legislation immediately upon return from the August recess.

                                                            Sincerely,