Puerto Rico Financial Oversight Law EnactedAugust 11, 2016 – Bloomberg BNA’s Bankruptcy Law
Stephen Selbst authored an article for Bloomberg BNA’s Bankruptcy Law Reporter regarding recently enacted legislation to address Puerto Rico’s municipal debt crisis. Puerto Rico has $71 billion in outstanding municipal bonds, and its public pension system is 96 percent underfunded. Known as the Puerto Rico Oversight, Management, and Economic Stability Act, or Promesa, the law provides for an automatic stay of all litigation against Puerto Rico and its many governmental agencies that have issued municipal bonds, and establishes a fiscal oversight board. In addition, instead of granting Puerto Rico and its municipal issuers access to Chapter 9 bankruptcy provisions, the law contemplates allowing bondholders to reach consensual restructurings first, where possible.