Heritage Action: Puerto Rico Bill ‘Designed to Mimic Chapter 9 Bankruptcy’

A House bill aimed at extending debt restructuring aid to Puerto Rico is “clearly designed to mimic Chapter 9 bankruptcy,” according to Heritage Action for America, the political arm of the Heritage Foundation.

The main differences are that it actually subjects even more debts to the process than allowed by U.S. states, and that the process is initiated by an oversight board instead of the government,” Heritage Action wrote Friday in a “Claims and Responses” description of H.R. 4900.

The group’s analysis also concluded that “under a very narrow definition of a bailout — one that only includes direct, taxpayer cash assistance — H.R. 4900 does not qualify.”

“However, whatever one wishes to call it, PROMESA is clearly an ad hoc federal intervention that would establish a new, favorable framework for Puerto Rico to address its debts,” Heritage Action added, referring to the bill by its acronym.

The group’s comments reflect an ongoing debate among conservatives about whether the bill constitutes a “bailout.”

On April 21, the COFINA Senior Bondholder Group, which generally favors a legislative solution to the debt crisis, published a “myth-buster” document that pushes back against arguments that the bill is a carbon copy of Chapter 9 bankruptcy.

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