Puerto Rico's representative in the House, Pedro Pierluisi, whose attempt to make it possible for the island to file for Chapter 9 bankruptcy to deal with its $73 billion-dollar debt has sputtered, praised Senate Democrats' plans to move similar legislation in their chamber.
Sens. Charles Schumer of New York and Richard Blumenthal of Connecticut have said they plan to file a bill allowing Puerto Rico to file for Chapter 9, which would allow some of the island's debt-ridden public utilities, such as the electric company, to restructure their debts. That option is available to U.S. municipalities and other taxing entities such as school districts if the state has authorized it, but not Puerto Rico, which is a U.S. territory. The island's governor said this week that Puerto Rico's debt is not payable and announced plans for leaders to negotiate a moratorium on bond payments.
"It is clearly the best course of action for both Puerto Rico and its creditors. The alternative is a legal no-man's land that benefits neither Puerto Rico nor those who loaned the territory money," said Pedro Pierluisi, Puerto Rico's resident commissioner in Congress.
The Chapter 9 proposal has faced opposition, largely from conservatives, who have been labeling it a bailout, which occurs when a company or country is given financial assistance, and some who prefer that Puerto Rico be placed in receivership.
Under Chapter 9, the island's government can work out a payment scheme with creditors under a plan that must be approved by a bankruptcy judge. It has been used by Detroit, Harrisburg, Pa. and other communities faced with the inability to pay off borrowing.
