Hearing: H.R. 870, the “Puerto Rico Chapter 9 Uniformity Act of 2015” - Hearings - Judiciary Committee

Chairman Goodlatte: Chairman Goodlatte: In 1984, Congress passed the Bankruptcy Amendments and Federal Judgeship Act that, among other things, defined the term “State.”  Contained in this definition is the exclusion of Puerto Rico from chapter 9 of the Bankruptcy Code.  While the text of this provision is clear, the rationale underlying the exclusion is not.

Today’s hearing will revisit the 1984 definition and reevaluate the merits of providing Puerto Rico access to chapter 9 of the Bankruptcy Code under H.R. 870, the Puerto Rico Chapter 9 Uniformity Act of 2015.

This legislation is not merely a technical “fix” to the Bankruptcy Code.  Puerto Rico is one of the largest municipal bond issuers in the country, with over $70 billion in outstanding debt.  Additionally, each of its public corporations has issued billions of dollars in municipal bond debt.  If one of Puerto Rico’s public corporations were to file for chapter 9, it would rank among the largest municipal bankruptcies in our country’s history.  Certainly, an issue of this magnitude deserves close and deliberate examination.  Today’s hearing will provide a record to assist the Committee and Congress in its evaluation of H.R. 870.
 
Chapter 9 of the Bankruptcy Code could provide predictability, transparency, and stability to a Puerto Rican municipal bankruptcy.  It also could serve as a framework within which parties could come to the negotiating table and reach a consensual restructuring.

That said, bondholders purchased Puerto Rican bonds at a time when chapter 9 was not an option.  Proposals to retroactively impact investors’ rights should be reviewed with care and caution.
 
Furthermore, Puerto Rico possesses characteristics that are not present in any of the 50 states.  For example, Puerto Rico has a non-federally regulated bank that it heavily relies on for financing its government operations.  This bank, the Government Development Bank for Puerto Rico, or the “GDB,” is also a significant creditor to each of Puerto Rico’s public corporations that could be eligible for chapter 9.  Given the uniqueness of the GDB, we should consider its potential role in a chapter 9 case when evaluating the merits of H.R. 870.

Thankfully, we have an excellent panel of witnesses who will be able to discuss each of these and other factors the Committee and Congress should consider when assessing the merits of H.R. 870.

Return to Hearing


Related Files



2237 Rayburn House Office Building

The Honorable Bob Goodlatte

Hearing: H.R. 870, the “Puerto Rico Chapter 9 Uniformity Act of 2015” - Hearings - Judiciary Committee

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