By Richard J. Cooper, Luke A. Barefoot, Jessica E. McBride, Daniel J. Soltman, and Antonio Pietrantoni (Cleary Gottlieb Steen & Hamilton LLP)
On May 3, 2017, the Commonwealth of Puerto Rico (the “Commonwealth”) and the Oversight Board established by Congress pursuant to the Puerto Rico Oversight, Management and Economic Stability Act (“PROMESA”) filed for bankruptcy under Title III of PROMESA in what is poised to become one of the largest bankruptcies in American history.
Drawing on first-hand experience to provide unique background on the unprecedented fiscal crisis confronting Puerto Rico, lawyers from Cleary Gottlieb Steen & Hamilton LLP (“Cleary Gottlieb”) are preparing a series of articles to inform readers on some of the key challenges and strategic considerations that Puerto Rico and the Oversight Board face in implementing a restructuring under PROMESA. To date, four articles have been published.
“Why Puerto Rico Will Likely Rely On PROMESA Title III,” published before the recent Title III filing, discusses PROMESA’s two restructuring frameworks: Title III (broad-based, in-court proceeding) and Title VI (voluntary negotiations, similar to collective action clauses). It focuses on some of the challenges that a Title VI proceeding would present and why, as opposed to Title III, it is likely not a viable forum for restructuring the Commonwealth’s obligations.
“Issues To Expect In A Title III Puerto Rico Restructuring” surveys some of the difficult choices that the Commonwealth and the Oversight Board will need to make in order to implement a debt restructuring and delves into some of the novel issues likely to arise in a Commonwealth restructuring proceeding under Title III.
“What Should Puerto Rico Offer Its Creditors?” considers restructuring currencies that the Commonwealth and the Oversight Board could offer creditors as part of a PROMESA restructuring. It focuses on four important elements that could facilitate a debt adjustment under PROMESA and create a stronger foundation for Puerto Rico to regain access to the capital markets and attract new investment.
“Disarming Puerto Rico’s Pension Time Bomb” provides an overview of the key strategic drivers in reforming Puerto Rico’s underfunded public pension systems. This article identifies the two legal pension reform mechanisms available to the Commonwealth — legislative action or implementation of reforms through one or more Title III proceeding(s) under PROMESA — and provides an overview of the most important factors likely to shape the ultimate outcome.
 Cleary Gottlieb assisted the Commonwealth of Puerto Rico and its instrumentalities with their financial challenges prior to the recent change in government. The firm also currently represents the Government Development Bank for Puerto Rico on a legacy matter.