Update On Puerto Rico

Supreme Court to Determine Constitutionality of DERA

By order dated December 4, 2015, the US Supreme Court has agreed to consider the appeal by the Commonwealth and the Government Development Bank regarding the constitutionality of the Commonwealth's Debt Enforcement & Recovery Act (DERA). In requesting the Supreme Court to consider its appeal, the Commonwealth stated that this case "presents a question of extraordinary importance and urgency and that the lack of a bankruptcy framework is hindering negotiations to reach a restructuring agreement.

Supervisory Oversight Board

On November 17, 2015, the Puerto Rico legislatures sent to the Governor for signature an act to create an independent local supervisory board to be called the "Board for the Financial Supervision and Economic Recover of Puerto Rico" (Senate Bill 1513; House Bill 2718) (the "Act"). The Act represents a compromise amongst versions introduced by the Governor of Puerto Rico (that would have created a local fiscal control board) and what was passed by the each of the Puerto Rico legislative houses. The Act creates a five-member independent supervisory board which will be tasked with reviewing and endorsing a five-year consolidated fiscal and economic plan to be submitted by Governor Padilla's working group (described below).

The legislatures have identified that the goal of the Act is to reduce and eliminate the fiscal deficit, while promoting an economic growth which will guarantee the welfare of the Commonwealth residents and the payment of debt.

The Board members will be appointed by the Governor with the advice and consent of the Senate.

Membership Requirements must have knowledge, expertise and at least 10 years of experience in finance, management, law, social sciences, economics or the organization or operation of business or government entities, and at least 3 of whom must possess material knowledge regarding governmental operations of the Commonwealth; may not be a holder of, or advise or represent, any holder of any bonds issued by a government entity of the Commonwealth or hold interests in funds that hold more than 10% of their funds invested in such bonds; may not, at the time of their appointment or during the preceding 5 years, be a director, officer, employee or contractor of the Commonwealth or any its entities, and in respect of a contractor, may not have been a contractor for the restructuring of debt of the Commonwealth or its instrumentalities as of the...