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Senate Declines to Exclude GOs, Cofina Debt from Moratorium Law

By on April 25, 2016

SAN JUAN – Senate President Eduardo Bhatia said the House amendments to the law that would allow the governor to declare a moratorium on the debt will be brought to a vote Tuesday, but only with language that will protect municipalities and the island’s cooperative banking sector.  

Following a vote from the majority caucus, the Senate opted to leave general obligation (GO) and Cofina debt in the debt moratorium measure. However, neither the Puerto Rico Electric Power Authority (Prepa) restructuring agreement nor any restructuring that results from Government Development Bank (GDB) negotiations with creditors will be part of the moratorium legislation.

“We are clarifying the debt moratorium law…. We are merely clarifying its scope and the purpose of the law,” he said at news conference Monday with Senate Majority Leader Aníbal José Torres and Sen. Jorge Suárez.

The decision was made following a Senate caucus meeting that lasted nearly three hours. The Emergency Debt Moratorium and Financial Rehabilitation Act was signed into law recently, but the House approved amendments that, in essence, excluded GOs and Cofina debt. The Senate agreed to pass an amended version of the amendments.  

Senate President Eduardo Bhatia

Senate President Eduardo Bhatia

“The petition made to Congress is to include all of the debt [in a restructuring]…. The government has to be consistent…. We cannot ask them to include all of the debt and then have us exclude [some of the debt] here,” Bhatia said. “We want to be consistent because that is what we ask of Congress.”  

The Senate leader said the debt moratorium law was not aimed at affecting cooperatives or municipalities, whose accounts will be protected from any debt moratorium to able to allow these to withdraw funds. In the case of the cooperative banking sector, the language will include provisions to ensure the solvency of these entities is protected and that they have priority in payments if the GDB becomes insolvent.

Bhatia did not say which senators will vote in favor of the bill. If the Senate passes the bill, it will have to go back to the House for amendments.

Some of the majority senators, such as Antonio Fas Alzamora and Miguel Pereira, want to exclude GO and Cofina debt from the moratorium law.  

During the caucus meeting, Bhatia said the senators had some questions about the securitization of the Puerto Rico Aqueduct and Sewer Authority (Prasa). Prasa Executive Director Alberto Lázaro was cited to appear before the caucus at 3 p.m. “We want to know why Prasa has a $180 million debt with contractors who did work for the entity, but is now saying it does not have money,” he said, adding that senators want to know if the funds were used to pay debt.

He also said the majority senators agreed to once again analyze the retirement system’s fiscal problems, whose funds are slated to be depleted in two years. “We analyzed the problem in 2013, but we have to evaluate the problem again,” he said.

House Speaker Jaime Perelló urged Bhatia against including the cooperative banking sector in the debt moratorium bill because the House is working on separate legislation for it.

He also said there are no votes to pass a bill that won’t exclude the GOs from the debt moratorium. “It will have to go to a conference committee, but the House will not concur with those amendments,” Perelló said.

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