by Zack A. Clement
Partner, Fulbright & Jaworski LLP
Puerto Rico faces a major financial crisis without precedent in modern history. The island’s government has changed contracts for currently employed labor and for retirees in a last-ditch attempt to maintain its bond rating. This year, however, Puerto Rico was downgraded anyway. Now, questions abound to whether Puerto Rico can sustain its current high level of debt.
Chapter 9 provides a legal procedure in which a state municipality can deal with its debt by figuring out how much cost cutting and tax increase it can afford, and proposing a plan of debt adjustment to pay its unsecured creditors what it can reasonably afford to pay. If creditors believe that the plan proposed by the municipality is not fair, they can object and the bankruptcy court will decide. Conventional wisdom suggests that Chapter 9 of the U.S. Bankruptcy Code is unavailable to Puerto Rico.
The CLE seminar Puerto Rico in Crisis: Current Topics in Public and Private Sector Restructurings and Bankruptcies will examine – and challenge – that conventional wisdom. We will analyze Chapter 9’s inner workings and how its principles can help deal with Puerto Rico’s financial crisis. We will look at the central question everyone asks: does Chapter 9 apply to Puerto Rico and its public corporations? Are there procedures through which the central Chapter 9 principles could be applied to Puerto Rico and its public corporations?
Join us on May 14 and learn the answers to these questions.