July 21, 2016
Authored by: Michael Cooley
On June 30, 2016, President Obama signed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) into law. A copy of the Act can be found here. The most significant portions of PROMESA are found in titles I and II, which establish an Oversight Board with budgetary and fiscal control over Puerto Rico, and title III, which creates of a debt adjustment procedure for Puerto Rico and other territories of the United States. From a bankruptcy perspective, title III gives rise to a fascinating new procedure that, while it does not make U.S. territories eligible to commence cases under chapter 9 of the Bankruptcy Code, patterns itself after a chapter 9 case by adopting and incorporating substantial portions of chapters 1, 3, 5, 9, and 11 of the Bankruptcy Code to create an wholly new debt adjustment process for Puerto Rico and other U.S. territories.