Puerto Rico’s local government revoked a law the Oversight Board has been considering using to issue restructured bonds without the local government’s support.
Puerto Rico Gov. Pedro Pierluisi signed Project 959 on Thursday, revoking the 1942 law, which had been used over the years to justify bond refundings.
The board has argued it could legally enact the Plan of Adjustment without the government’s support by either
Board attorneys were looking at whether the wording of the law and its use for refundings may allow its use in the restructuring under the Plan of Adjustment.
Thursday’s action may eliminate that option.
Pierluisi will have to send the new law (revoking the 1942 law) with a certification that it is consistent with the board’s fiscal plan, said Matthias Rieker, spokesman for the Oversight Board. Once the board receives this, the board will review it, he said.
Board members want to have the local government support the proposed Plan of Adjustment for the central government’s debts, pensions, and other obligations. Bondholders have
The board has taken the position that pension cuts are key to a fair bankruptcy resolution as pensions make up $48.7 billion of Puerto Rico's hefty $112.7 billion of debt and pension liabilities.
Pierluisi and local government officials have continued to argue against any cuts to pensions as a sticking point against the Plan of Adjustment. The Board has said it was open to working with the government to negotiate a way to agree to terms that would get the deal done and Rieker confirmed those meetings have been ongoing, with the latest on Wednesday.
The board and the local government officials are discussing how pensions should be treated in the plan.
