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Puerto Rican Officials Warn Congress of Major Defaults Without Restructuring

The New York Times

Friday, February 5, 2016

Puerto Rico and its top advisers made their case in Washington on Friday for a law that would allow broad restructuring of the island’s multibillion-dollar debt, saying that if Congress did not act soon, major defaults were likely this spring.

The officials also said they knew that any legislative help would come at a stiff price: Puerto Rico would have to submit to a federal control board, something viewed by some on the island as colonialist-style interference.

“I think everybody has acknowledged that a control board is an essential feature,” Jim Millstein, a financial adviser to the Puerto Rican government, said in a briefing for staff members of the House of Representatives, which is considering some form of legal help…

As Mr. Millstein spoke, a Treasury official, Antonio Weiss, made a similar argument at the Bipartisan Policy Center, which hosted a panel discussion on a legal framework for resolving Puerto Rico’s crisis.

“Without the backstop of a restructuring authority, our biggest concern is that a decade of recession could become another lost decade,” Mr. Weiss said.

The officials said it was not essential to grant Puerto Rico access to Chapter 9 bankruptcy, an approach that was considered last year but now appears to have been discarded. Instead, they said Congress could enact other measures to help Puerto Rico restructure its debts under the Territorial Clause of the United States Constitution.