WASHINGTON – Sen. Elizabeth Warren, D-Mass., is trying to amend an energy bill pending before the Senate to include a provision that would temporarily halt litigation over Puerto Rico debt until April 1.
The amendment, which she filed late Thursday, mirrors a bill she and Sens. Richard Blumenthal, D-Conn., Chuck Schumer, D-N.Y., Bob Menendez, D-N.J., and Minority Leader Harry Reid, D-Nev., introduced in December. House Minority Leader Nancy Pelosi, D-Calif., introduced companion legislation in the House at the same time.
If the amendment is passed as part of the energy bill, it would put a stay on any creditor litigation filed on or after Dec. 18.
Warren's effort to include the amendment has support from Blumenthal, Schumer, and Menendez, co-sponsors of the legislation, as well as Sens. Kirsten Gillibrand, D-N.Y., Chris Murphy, D-Conn., and Bill Nelson, D-Fla.
The amendment asserts that as Puerto Rico continues to deal with roughly $70 billion in debt, "a temporary stay on litigation is essential to facilitate an orderly process for stabilizing, evaluating, and comprehensively resolving the commonwealth's fiscal crisis." A. stay would avoid a disorderly race to the courthouse, benefitting creditors and other stakeholders, and will only be temporary, it says.
"Puerto Rico desperately needs this short term financial tourniquet to stop its fatal bleeding," Blumenthal said in December when he joined Warren in introducing the original bill.
The April 1 deadline for the potential stay aligns with a late December directive House Speaker Paul Ryan, R-Wis., gave to House committees with jurisdiction over Puerto Rico to create a "responsible solution" for the commonwealth by the end of March. A House Natural Resources Committee subcommittee held a hearing on reforming Puerto Rico's energy infrastructure on Jan. 12 and another subcommittee will hold a hearing Feb. 2 to discuss the possibility of a federal oversight board for the territory.
Assured Guaranty Ltd., Ambac Financial Group Inc., and Financial Guaranty Insurance Co. have all filed lawsuits in January, during the time period that would be covered by the moratorium. The lawsuits challenge clawback procedures Puerto Rico Gov. Alejandro Garcia Padilla instructed the commonwealth to implement in November to secure enough funding to repay the territory's constitutionally guaranteed general obligation debts. The clawbacks divert money meant to repay non-GO bond debt to funds used to repay GOs. A judge has consolidated the insurers' cases in the U.S. District Court for the District of Puerto Rico.
The commonwealth has drawn from funds previously pledged for Puerto Rico Highways and Transportation Authority, Puerto Rico Convention Center District Authority, and Puerto Rico Infrastructure and Finance Authority bonds. The procedure means that only funds that trustees of the non-GO bonds had at the time of the clawback implementation can now be used to repay any debt on the bonds.
The clawbacks diverted $164 million from the non-GO bonds to make a full GO debt payment due on Jan. 4, according to Puerto Rico's Government Development Bank. However, PRIFA defaulted on a payment scheduled for the same date because of the procedures, the GDB said.
