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H.R. 5278: The Greatest Hits

May 20, 2016 | House Committee on Natural Resources Press Office
Since the introduction of H.R. 5278 (Rep. Sean Duffy), the "Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)," there has been a lot of news coverage. We'll break down some of the best for you: 
 
PROMESA FRAMEWORK:
  • "[T]he bill actually preserves existing lawful priorities and leaves it up to the board to grant any adjustments, subject to court review. To be sure, this basically relocates the same squabble among creditors that had been playing out in Washington; now the referee will be an impartial panel of experts armed with a reliable audit of the island’s obligations." -Washington Post Editorial Board 5/19/16
     
  • "A key feature of the proposal is creation of a fiscal oversight board with exclusive authority to enact and enforce fiscal plans and reforms aimed at improving access to capital markets. For bondholders, the act would promote voluntary restructuring agreements and stipulate that any adjustments of debts must be “in the best interests of creditors.” - Pensions and Investments 5/19/16  
     
  • “The House bill would not change Puerto Rico’s exclusion [from Chapter 9], but instead would give Puerto Rico and other United States territories a set of rules for reducing their debts outside of bankruptcy…It would first sort through Puerto Rico’s bewildering array of bonds and put similar creditors together in classes, honoring Puerto Rico’s existing bond priorities. Each class would then get a settlement offer and have the chance to vote on it. The offers would come from the board, not the government of Puerto Rico, reducing any possibility of local connections skewing deals.” – New York Times 5/20/16
BAILOUT PREVENTION VS “BAILOUT”:
  • "[T]he latest round in a lobbying and public advocacy effort that has drawn ire from both sides of the aisle in Congress. It follows a targeted ad campaign that has spent millions to stop the bill by labeling it a bailout, a loaded word ever since the public uproar over the bank and auto rescues in the 2008 financial crisis. No federal taxpayer funding goes toward paying Puerto Rico's debt." - Politico 5/20/16
  • “House Speaker Paul D. Ryan said Thursday. 'We wanted to make sure that the restructuring worked, and that the restructuring is done in a way that it prevents any taxpayer bailout, or some precedence that could affect the bond markets. And we’re very confident that we’ve achieved that.'” - Washington Post 5/19/16
PROTECTING CREDITORS:
  • "The latest version of the PROMESA bill adds more protections for the island's creditors. There is now language explicitly stating that any adjustments of debt must be 'in the best interests of creditors.'" - CNN 5/19/16
     
  • "Creditors could benefit from some of the latest changes to the bill because the board and a court would have to approve a restructuring that honors existing rights and remedies of Puerto Rico’s various bonds. [...] The bill also protects any existing, voluntary restructuring agreements between a commonwealth agency and its creditors." - Bloomberg 5/18/16
NO STATE CONTAGION:
  • "'This territories-clause bill, which will bring all creditors to the table and establish a strong and independent fiscal oversight board, should appeal to conservatives who were concerned about a ‘bailout’ or ‘contagion,' former New Hampshire Senator Judd Gregg, a spokesperson for the group, said in an email." - Politico 5/19/16
     
  • "[Ryan] has said the bill does not set a precedent for debt-ridden states who may want similar help." - Associated Press 5/19/16
     
  • "The entire statute is being pursued through the territorial clause, not the bankruptcy clause, which should ease concerns states would potentially be allowed to file for Chapter 9." - Daily Caller 5/17/16
CONSEQUENCES OF INACTION
  • "The alternative seems to be the kind of open-ended legal and financial chaos that engulfed Greece in 2010." - New York Times 5/19/16
     
  • "'I hope every Member of Congress will bear in mind that the collapse of the bill could mean the collapse of Puerto Rico’s government,' [Pedro Pierluisi] said in a statement." Washington Post 5/19/16
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