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Puerto Rico Bankruptcy Statement Filed

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The United States of America filed with the U.S. Bankruptcy Court a memorandum of law in support of the constitutionality of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA).

The statement explains, “Congress enacted PROMESA in 2016 amidst the worst fiscal crisis in Puerto Rico’s history. To prevent the further downward spiral of Puerto Rico’s economy, PROMESA provides a comprehensive approach that, among other things, allows the Commonwealth of Puerto Rico and its instrumentalities to restructure their debts in a process akin to Chapter 9 of the U.S. Bankruptcy Code. Central to PROMESA’s statutory scheme is the creation of a Financial Oversight and Management Board (‘Oversight Board’) within Puerto Rico’s territorial government, which Congress tasked with achieving Puerto Rico’s fiscal responsibility and restoring access to the capital markets.”

In addition, “This includes acting as the sole representative of the debtor in a debt restructuring proceeding instituted under PROMESA. Aurelius Investment, LLC, Aurelius Opportunities Fund, and Lex Claims, LLC (‘Aurelius’) – hedge funds holding outstanding bonds issued by the Commonwealth – contend that PROMESA’s statutory scheme governing the appointment of members of the Oversight Board violates the Appointments Clause of the Constitution…and encroaches on the President’s executive authority in violation of separation of powers. Accordingly, Aurelius asks that the Court dismiss the debt restructuring proceeding initiated by the Board on behalf of the Commonwealth of Puerto Rico. Contrary to Aurelius’s arguments, PROMESA’s appointments scheme is constitutional.”

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