Conclusions from the Third Meeting of PROMESA

  1. The Board will not approve the Fiscal Plan for it is lacking on much of what is required by sec. 201(b)(1) of PROMESA, most particularly, the Plan depends on an increase of Federal Funds which has yet to occur.
  2. Since the First Fiscal Plan was a “lost opportunity”, the Board will receive the Government’s second plan by December 15 but will make prepare its own no later than January 31.
  3. At that time, the Board will very likely extend the PROMESA stay until May 1, 2017, since during meeting and press conference it made clear that there can be no negotiations before the plan is in place. I assume it is to assure bondholders that they will get paid what is agreed in the negotiations. As part of the negotiations, it is likely that bondholders will be assured of certain changes to the Government structure. If PR does not want to pursue these “suggested” changes, the Board can achieve them via Title III (Bankruptcy).
  4. Likely after the negotiations, some parts of the Government will be sent into Title III, including the Retirement Funds of the ELA, Teachers and Judiciary. Title III may also be used to push through changes that the Board believes are needed in the Governmental structures but elected officials balk at doing. This will likely include rejection of Union Contracts.
  5. There will be pressure on the Government to sell certain assets. Again, if the Government balks, Title III may be utilized.
  6. Title III will also affect suppliers and all other persons to whom the Government owes money.
  7. There will be cuts in Government budget, either this fiscal year or next fiscal year or both.
  8. It is almost a sure thing that Title III will be used by the Board. The question is what agencies or bond issuers will enter into Title III Bankruptcy