February 01, 2016

Senators Introduce Amendment to Establish Temporary Stay on Creditor Litigation Against Puerto Rico

Text of the amendment (PDF) 

Washington, DC – United States Senators Elizabeth Warren (D-Mass.), Richard Blumenthal (D-Conn.), Harry Reid (D-Nev.), Charles E. Schumer (D-N.Y.), Bob Menendez (D-N.J.), Bill Nelson (D-Fla.), Kirsten Gillibrand (D-N.Y.), and Chris Murphy (D-Conn.) have introduced the Puerto Rico Emergency Financial Stability Act as an amendment to the Senate energy bill. The legislation would establish a short-term stay on creditor litigation until Congress takes action to allow Puerto Rico to restructure its debts.

“Puerto Rico is in trouble, and if Congress doesn't act, the Wall Street creditors will pick apart what is left of the economy.  This amendment would give Puerto Rico some breathing room while Congress prepares a broad restructuring package,” Senator Warren said. “The Puerto Rican people have been asked to bear huge costs of a long running debt crisis, and now Congress should do its part for the millions of Americans in Puerto Rico who are trying to build a future for themselves and for their kids."‎

“As Puerto Rico’s fiscal fire continues to spread, Congressional inaction is only fanning the flames. The failure to pay certain creditors, exposing Puerto Rico to costly lawsuits, means that Congress’s continued foot dragging will lead to immense and irreparable damage for 3.5 million Americans living there. Puerto Rico will likely be burdened with costly, completely avoidable lawsuits further draining their already limited resources. A fiscal and humanitarian disaster is imminent unless Congress takes necessary, urgent action,” Senator Blumenthal said.

“We ought to provide Puerto Rico with the breathing room they need while Congress works out a long term solution to the debt crisis. Puerto Rico deserves the ability to restructure their debt, and until Congress is able to pass legislation that will allow them to do so, Puerto Rican tax dollars should go to sustaining essential resources on the Island, not defending lawsuits against creditors seeking to earn a quick buck at the expenses of the millions of people living on the Island,” Senator Schumer said.

"The lack of federal support combined with unequal treatment at the national level are, whether we want to own up to it or not, a major contributing factor in the current economic crisis in Puerto Rico,” said Senator Menendez. “And as the Puerto Rican government already faces a creditor lawsuit from a missed debt payment, the least Congress should be offering is this temporary reprieve that would give our fellow citizens on the island much-needed breathing room while we seek more permanent reforms. I am pleased to join my colleagues in introducing this common-sense amendment to continue our efforts to stand up and do our part to restore financial stability and solvency for Puerto Rico.”

“Our fellow Americans in Puerto Rico are facing a crisis,” said Senator Nelson. “It’s time for Congress to come together to find a solution before the situation there gets any worse.”

“Our fellow American citizens in Puerto Rico are going through tremendous financial hardship now, and they are being forced to wait for Congress to act,” said Senator Gillibrand. “The deteriorating economic situation in Puerto Rico is a problem that we can only begin to solve with meaningful legislation. Congress must come together to help Puerto Rico’s families.” 

Legislation mirroring this amendment was originally introduced on the last day of session in 2015 (S.2436), with a companion bill filed by Nancy Pelosi in the House (H.R. 4290). The Senate bill was referred to the Senate Energy Committee in December. Just like an automatic stay under Title 11 of the US Code, this amendment would prevent creditors from stripping out value from Puerto Rico before a shared plan can be agreed to.

This amendment follows up on a letter that the entire Senate Democratic Caucus sent last week to Republican leadership demanding debt restructuring authority for Puerto Rico. That letter recognized that failure to act would mean “extensive litigation, growing fiscal and economic turmoil, continued degradation of essential government services, and even greater migration to the U.S. mainland.”

A PDF copy of the amendment is available here.