A long-shot bill to give Puerto Rico's ailing public agencies a chance to restructure their massive debts under the section of U.S. bankruptcy law used by cities such as Detroit and Stockton, California, will get a hearing before a key congressional committee, according to two sources familiar with the matter.
The House Judiciary Committee, chaired by Rep. Bob Goodlatte, a Virginia Republican, plans to hear the bill in coming weeks, both sources, who are familiar with the committee's plans, said on Saturday.
The bill to allow Puerto Rico's power, water and highway authorities to reorganize under Chapter 9 of the U.S. Bankruptcy Code is sponsored by the U.S. territory's non-voting representative to Congress, Democrat Pedro Pierluisi. Of the three, the Puerto Rico power authority, Prepa, is in the most dire shape, laden with about $9 billion in debt and already deep in restructuring negotiations with bondholders.
Pierluisi initially introduced the bill in July after the Caribbean island's lawmakers enacted local legislation granting the agencies similar debt-restructuring authority. On Feb. 6, however, a federal court struck down that law, saying it violated the U.S. Constitution by allowing a state government to modify municipal debt.
Pierluisi last week said that Puerto Rico now should focus efforts on ensuring it has access to Chapter 9, rather than insisting it has the right to enact a local bankruptcy law. While the committee's plan to give the bill a hearing offers some reason for optimism, analysts have said previously its prospects are slim in the Republican-led Congress.
In all, Puerto Rico and its agencies and other affiliates have some $70 billion of debt floated within the U.S. municipal bond market, where its bonds have long been popular with investors thanks to triple-tax free status and relatively high yields. The island economy remains mired in recession, and its credit rating has been slashed deep into junk territory.
The Judiciary Committee's plan to hold a hearing was earlier reported by the Wall Street Journal.
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