The far-reaching effects if Puerto Rico snubs precedent and the rule of law
HAMILTON, Bermuda — The current Financial Oversight and Management Board for Puerto Rico (Oversight Board) is attempting to invalidate more than $6 billion of general obligation bonds and to initiate clawbacks of principal and interest payments to bondholders.
It claims that the bonds were issued in excess of a Puerto Rico constitutional debt limit, notwithstanding the Commonwealth’s specific representations to the contrary when the bonds were issued.
In taking these actions, the oversight board ignores US Supreme Court precedent, dating back to the 19th century that if an issuer specifically represents the validity of its bonds to investors at the time of issuance, it is barred from later denying repayment based on a claim of invalidity.
The actions also violate the basic tenets of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), which the US Congress enacted in June 2016 to provide a formal process for Puerto Rico’s debt restructuring, restoration of its capital market access and to provide supervision of its financial management by the oversight board.
Read more: https://www.caribbeannewsnow.com/2019/07/03/the-far-reaching-effects-if-puerto-rico-snubs-precedent-and-the-rule-of-law/