Governor: Dismissal of bankruptcy case would be ‘serious failure’ for fiscal board

It would be terrible for Puerto Rico if the Financial Oversight and Management Board opts to request the dismissal of Puerto Rico’s bankruptcy case amid its opposition to the law that would enable the plan of adjustment (POA) for some $33 billion in debt, Gov. Pedro Pierluisi Urrutia said Wednesday.

The governor signed the POA enabling legislation, House Bill 1003, into law late Tuesday despite the oversight board’s opposition. The board said on Monday that it may withdraw the debt adjustment plan if it is unable to reach a consensus.

“It would be a serious failure for the financial oversight board if this bankruptcy case is dismissed. It would be a terrible failure,” Pierluisi said at a press conference.

“In the same way, trying to negotiate with a large number of creditors and then have everything turn for the worst, would also be another failure,” he added.

The governor hopes that the mediation process before Judge Barbara Houser continues and that the POA can be amended before it goes for confirmation hearings on Nov. 8. Some creditors have threatened to seek the case’s dismissal.

A House report on the bill enacted into law states that “by virtue of this Act, the Commonwealth of Puerto Rico supports the Plan and the public policy set forth in this Act, which, subject to PROMESA’s [the Puerto Rico Oversight, Management and Economic Stability Act] mandate to restore fiscal responsibility in Puerto Rico and the budgetary powers of the Board under PROMESA, includes zero cuts to the pensions of retired public employees, to the accumulated benefits of active employees and expresses the desire to promote the well-being of the people of Puerto Rico.”

Likewise, it indicates that “in total, the agreements included in the POA reduce the public debt of the Central Government by approximately 50 percent.”

“That is, the public debt would be reduced from approximately $70 billion to $34 billion, and the General Obligation (GO) and Public Buildings Authority bond debt would be reduced from $18.8 billion to $7.4 billion,” the report reads.