The oversight panel charged with helping lift Puerto Rico out of its fiscal morass looks to be more pragmatic than political, analysts say, which may help avoid an outcome for the commonwealth’s creditors similar to Detroit’s bankruptcy.
The panel, created as part of PROMESA, a law signed by the president on June 30, will oversee Puerto Rico’s budget and manage its $73 billion debt.
Detroit, which emerged from bankruptcy in late 2014, treated city pensions more favorably than its outstanding bonds, most of which were insured, and the process was plagued by political conflict.
While it’s too early to know the direction of the board, some analysts are encouraged that Puerto Rico’s debt will be handled differently than Detroit’s obligations.
“There are no ideologues in the group,” an analyst told Reuters.
“These board members are technocrats, and it gives us confidence that this is not going to be overly politicized,” said Nader Tavakoli, chief executive of bond insurer Ambac Assurance, according to Reuters.
The board members include a retired bankruptcy judge, a former head of Puerto Rico’s Government Development Bank, the head of the Federal Home Loan Bank of New York and a University of Pennsylvania law professor.
Makeup of board overseeing Puerto Rico’s muni debt
PROMESA – the Puerto Rico Oversight, Management and Economic Stability Act – directed the president to appoint six members from a list submitted by Congressional leaders and a seventh at his sole discretion.
The governor of Puerto Rico is an ex officio non-voting member.
The board has broad powers over budgetary and financial issues, including debt restructuring. Republicans chose four members, and Democrats chose three.
Republican appointees include:
• Andrew G. Biggs, a former trustee of the Social Security Administration and specialist on state pension funding.
• Jose B. Carrion III, a bankruptcy professional in Puerto Rico.
• Carlos M. Garcia, head of a private equity firm and former head of Puerto Rico’s Government Development Bank.
• David A. Skeel, Jr., a University of Pennsylvania law professor.
Those appointed by Democrats are:
• Arthur J. Gonzalez, a New York University law professor and former bankruptcy judge.
• Jose Ramon Gonzalez, Chief Executive Officer and president of Federal Home Loan Bank of New York.
• Ana J. Matosantos, a consultant and former budget official for the state of California.
“In order to be successful, the Financial Oversight and Management Board will need to establish an open process for working with the people and Government of Puerto Rico,” Obama said in a statement, “and the members will have to work collaboratively to build consensus for their decisions.”
As we noted previously, “Next Move on Puerto Rico Muni Debt: Oversight Board,” PROMESA puts creditor lawsuits for missed payments on hold until at least six months after the board is formed, a move to give the commonwealth more time to work through its issues.
That provision is being challenged in court.
