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1 1 (February 16, 2022)

handle is hein.crs/govefhb0001 and id is 1 raw text is: Congressional Research Service Adjustment of Puerto Rico's Public Debts February 16, 2022 On January 18, 2022, a federal judge confirmed a plan of adjustment to restructure debts of the Commonwealth of Puerto Rico-the island's central government-and certain closely linked public authorities, as well as pension plans for teachers, public employees, and judges. That confirmation resolves various legal disputes, albeit subject to appeals. It also reduces fiscal uncertainty that emerged once the depth of Puerto Rico's fiscal challenges became widely known. In 2015, then-Governor Alejandro Garcia Padilla declared the island's public debts, totaling about $72 billion, unpayable. Unfunded pension liabilities were estimated at $55 billion. Puerto Rico's bonds had been issued by 18 different issuers, engendering disputes over payment priorities. Garcia Padilla, citing provisions in Puerto Rico's Constitution, clawed back revenues from several public corporations to support the central government's general obligation (GO) bonds, which sharpened contention between those GO bondholders and public corporations' bondholders. Moreover, some GO bonds appeared to have overstepped debt limits in Puerto Rico's Constitution. Congress barred Puerto Rico's access to the Bankruptcy Code in 1984. The U.S. Supreme Court struck down Puerto Rico's attempt to employ a local bankruptcy law in 2016. On June 30, 2016, Congress addressed Puerto Rico's fiscal crisis by enacting PROMESA (P.L. 114-187), which established a Financial Oversight and Management Board and two ways to restructure debt. In particular, Title III of PROMESA drew on Chapter 9 and other parts of the Bankruptcy Code to set up a debt restructuring process in which the Oversight Board would represent Puerto Rico's government. The Chief Justice selected federal district court judge Laura Taylor Swain to preside over the Title III cases. In May 2017, the Oversight Board filed Title III petitions for Puerto Rico's central government, the tax- backed funding authority (COFINA), and several public corporations with the court. The petitions stayed various creditor lawsuits. The two major hurricanes that hit Puerto Rico in September 2017 delayed the restructuring process, as did earthquakes starting in December 2019 and the March 2020 onset of the COVID-19 pandemic. Nonetheless, the island government's former fiscal agent, the Government Development Bank, was wound up in November 2018 under PROMESA's Title VI process. A plan to restructure bonds issued by the sales-and-use tax-backed funding authority, known as COFINA, was confirmed in February 2019, resolving the dispute between COFINA and GO bondholders (congressional clients may request a memorandum with more details). In particular, sales tax revenues were to be split, with new COFINA Congressional Research Service https://crsreports.congress.gov IN11858 CRS INSIGHT Prepared for Members and Committees of Congress

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