The Financial Oversight and Management Board for Puerto Rico announced Monday it approved, certified and filed in the U.S. District Court for the District of Puerto Rico voluntary petitions under Title III of the Puerto Rico Oversight, Management and Economic Stability Act for the Puerto Rico Highway and Transportation Authority and the Government of Puerto Rico Employees Retirement System.
Chairman José Carrión explained that beyond the government’s request, the Oversight Board determined it is “necessary and appropriate for the HTA and the ERS to file voluntary petitions under Title III of PROMESA to protect the residents of Puerto Rico, the HTA, the ERS and the interests of creditors and pensioners and avoid further negative impact on the economy from a flurry of litigation and continued uncertainty.”
The HTA has debts of nearly $80 million with at least 20 unsecured creditors, of which more than half, or $46 million, is owed to the Puerto Rico Electric Power Authority, according to the court filing.
Meanwhile, the Employees Retirement System’s debt with its top 20 unsecured creditors totals $462,758, its filing shows.
Puerto Rico’s Board-certified Fiscal Plan includes structural reforms aimed at increasing labor force participation and fostering economic growth, as well as “substantial expenditure cuts and revenue increases in an effort to structurally balance the budget and make funds available for debt service,” Carrión said.
“But the government’s liquidity and solvency problems are massive and Title III has now become necessary to protect the people of Puerto Rico,” he said.
“The Oversight Board takes these actions solely in order to fulfill its purpose as stated in PROMESA to provide a method for the Commonwealth and its instrumentalities to achieve fiscal responsibility and access to the capital markets,” Carrión concluded.
On Sunday night, Gov. Ricardo Rosselló notified the Oversight Board of the petitions for relief and adjustment of debt for the two credit-issuing government entities.
The start of Tilte III proceedings for these entities imposes an automatic stay that prevents creditors from taking actions to collect money and debts owed.
This is part of a court-supervised process within a framework that provides for an orderly restructuring of the debt of each entity and allows as much creditor consensus as possible.
At the same time, these entities will operate in the ordinary course and will continue services on an uninterrupted basis for the benefit and protection of the people of Puerto Rico, the governor said.
The Puerto Rico Fiscal Agency and Financial Advisory Authority said the government will continue to engage in dialogue and negotiations with creditors of other governmental entities under Title VI of PROMESA and will preserve its options for commencing additional Title III proceedings when necessary to protect the interests of Puerto Rico.
The government has already filed petitions for the Commonwealth as well as the Puerto Rico Sales Tax Financing Corp., known as COFINA.