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Law360 (March 23, 2020, 5:50 PM EDT) -- The Puerto Rico Financial Oversight Board announced Monday in the face of the "unprecedented reality" of the COVID-19 pandemic that it was authorizing the island's government to spend an additional $787 million on emergency measures.
The announcement, which said $160 million would go to small businesses and self-employed individuals put out of work by COVID-19 business closures, comes as the board is asking the Puerto Rico bankruptcy court to postpone hearings on its plan to restructure $35 billion of the commonwealth's debt until further notice.
"The oversight board's singular focus right now is on supporting the government of Puerto Rico in helping to protect the people from the COVID-19 virus, and to minimize and contain the pandemic here," board chairman José Carrión said in the announcement.
According to the announcement, $160 million of the spending will consist of one-time payments to self-employed individuals and small businesses affected by Gov. Wanda Vázquez Garced's order to close all nonessential businesses on March 15.
The announcement said another $237 million of the funds are earmarked as one-time bonuses for public and private nurses, technicians, EMS personnel, correction officers and other public safety employees, and $50 million will be spent to restock supplies and buy equipment for hospitals and other public safety institutions. An additional $240 million will pay for tablets and provide software and training to enable distance learning for public schools, and $100 million will compensate municipalities for lost revenues.
The announcement said this was in addition to the board's approval to spend $160 million in emergency reserve funds and temporarily exempt prepared foods, sanitizers and disinfectants, face masks, cold medications and other "essential" items from sales taxes.
In a motion filed with the bankruptcy court Monday, the board asked the court to adjourn both a planned June hearing on its plan disclosures and the April objection deadlines pending a report on how the island is dealing with the pandemic, saying now was not the time to be examining its plans to reduce the island's $70 billion in debt.
"The spread of COVID-19 and the economic effects therefrom, including from the closure of all non-essential businesses on Puerto Rico, cannot be calculated at this time and the attention of the government is dedicated to addressing the pandemic," the board said in the motion.
In September the board announced it had reached a deal with bondholders and pension plan beneficiaries for a plan that would reduce the island's bond debt from $35 billion to $12 billion and trim pension benefits to deal with $50 billion in pension liabilities.
A revised plan cutting additional debt was submitted to the court Feb. 28, and a hearing date on the plan disclosure statement was set for June 3, with objections due by April 24.
The motion asks the court to order the commonwealth and the board to provide a report before May 15 explaining the effect the epidemic has had on the island and the steps taken to deal with it, along with a proposed new hearing schedule.
"The oversight board agrees that the health and safety of the people of Puerto Rico must be the number one priority at this time," the board said in an announcement released Saturday.
The board said in the announcement that it will be engaging in "collaborative discussions" with the island's elected officials to find "reasonable and meaningful financial and policy solutions" to the crisis.
Representatives of Garced's office did not immediately respond to requests for comment Monday.
The board was established in 2016 to oversee the island's finances under the Puerto Rico Oversight, Management and Economic Stability Act, which was signed into law in July 2016 by then-President Barack Obama just before the island defaulted on $800 million in municipal debt. In May 2017, Puerto Rico's government filed for court-protected restructuring to deal with $70 billion in debt.
The board is represented by Martin J. Bienenstock and Brian S. Rosen of Proskauer Rose LLP and Hermann D. Bauer-Álvarez of O'Neill & Borges LLC.
The bankruptcy is In re: Commonwealth of Puerto Rico et al., case number 3:17-bk-03283, in the U.S. Bankruptcy Court for the District of Puerto Rico.
--Editing by Haylee Pearl.
For a reprint of this article, please contact reprints@law360.com.
