Puerto Rico bill allowing for Chapter 9 filing gains two new sponsors

By Kali Hays

New York, July 21 – A bill seeking state-like treatment for the Commonwealth of Puerto Rico under Chapter 9 of the federal Bankruptcy Code is now being co-sponsored by senator Patrick Leahy (D-Vt.) and senator Mark Warner (D-Va.), according to a press release.

Senator Leahy is the ranking democrat on the Senate Judiciary Committee and senator Warner sits on both the Senate Banking Committee and the Senate Finance Committee.

As previously reported, the bill, an identical companion bill to H.R. 870, the Puerto Rico Chapter 9 Uniformity Act, was introduced last week by senator Richard Blumenthal (D-Conn.) and senator Charles Schumer (D-N.Y.) and 10 other U.S. senators.

Puerto Rico’s exclusion from Chapter 9 led the territory’s government, in July 2014, to enact local legislation called the Puerto Rico Public Corporation Debt Enforcement and Recovery Act, which sought to authorize some Puerto Rico public corporations to adjust their debts.

However, multiple investment firms that own Puerto Rico Electric Power Authority bonds sued the Puerto Rico government, arguing that the Recovery Act violated the U.S. Constitution.

On Feb. 6, a federal district court judge in Puerto Rico held that the Recovery Act is preempted by the U.S. Bankruptcy Code and is therefore invalid under the Supremacy Clause of the Constitution. On July 6, the U.S. Court of Appeals for the First Circuit affirmed the district court’s decision.

According to the press release, the Puerto Rico Chapter 9 Uniformity Act has already been endorsed by the U.S. Department of Treasury and U.S. House of Representatives minority leader Nancy Pelosi (D-Calif.), minority whip Steny Hoyer (D-Md.) and the ranking member of the House Judiciary Committee, John Conyers (D-Mich.).

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