Congress files bill to end conflicts of interest in PROMESA debt restructuring
Rep. Nydia M. Velázquez (D-NY) has introduced the “Puerto Rico Recovery Accuracy in Disclosures Act of 2021.” Known as PRRADA, the bill would extend current US law to require disclosures of conflicts of interest in all PROMESA bankruptcy proceedings in Puerto Rico, and thereby improve transparency and restore confidence in the island’s future.
Senator Bob Menéndez (D-NJ) has introduced a companion bill in the US Senate.
Velázquez filed the bill on the same day that the Financial Oversight and Management Board for Puerto Rico announced it had reached a new Plan Support Agreement (PSA) with major holders of Puerto Rico’s General Obligation and Public Buildings Authority bonds – including the Ad Hoc Group of Constitutional Debtholders, Ad Hoc Group of GO Bondholders, Lawful Constitutional Debt Coalition and QTCB Noteholder Group – that will restructure some $18.8 billion of GO and GO-guaranteed liabilities.
The New PSA builds on an agreement reached in February 2020 by providing additional benefits and enhanced flexibility to the Commonwealth in light of the COVID-19 pandemic, the creditors said.
The agreement calls for:
- The reduction of $18.8 billion of GO and GO-Guaranteed Liabilities to $7.4 billion, resulting in an extra $2.7bn in principal debt reduction compared to the February 2020 plan;
- A cut in the Commonwealth’s maximum annual debt service to $1.15 billion, representing an additional 22% reduction from the $1.47 billion limit in the previous plan;
- new terms further align creditors’ interests with Puerto Rico’s long-term revitalization and economic performance by adding a “contingent value instrument” to recovery mix; and
- Creditors will not receive any federal money or any funds earmarked for pensioners or essential services.
Velázquez’s bill requires attorneys, accountants, consultants, and other professionals employed by the Oversight Board in a Title III case to submit verified disclosures of their connections with the debtor, creditors, or people employed by the Oversight Board, prior to being compensated under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA).
The disclosures must comport to existing bankruptcy rules and include information on the identity of each entity or person with whom such professional person has a connection.
Under the bill, the US Trustee would also review the disclosures submitted and potentially file comments with the Court should the disclosures not be properly submitted, potentially preventing compensation from a firm that is in violation.
The new disclosure requirements would apply retroactively to individuals and companies already employed by the Oversight Board.
Velázquez’s bill has been cosponsored by: Andy Biggs (R-AZ); Pramila Jayapal (D-WA); Raul M. Grijalva (D-AZ); David Cicilline (D-RI); Jamie Raskin (D-MD); Jenniffer Gonzalez (R-PR).