The Ad Hoc Retiree Committee has asked the judge overseeing the restructuring process to order the appointment of a retiree committee for the case, and to let the 18 current members of the Ad Hoc Retiree Committee, including a representative from AARP, serve on the committee.
The Ad Hoc committee reports that about 160,000 of Puerto Rico’s 3.5 million residents are active public employees who have accrued benefits in the commonwealth’s public pension plans. Another 160,000 residents are retired enrollees in the public pension plans. About 9.2% of all commonwealth residents are active or retired enrollees in the public pension plans.
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“The claims for pension underfunding alone are estimated at approximately $50 billion,” the Ad Hoc committee says in a justification of the request for the appointment of a retiree committee.
The Financial Oversight and Management Board for Puerto Rico, the entity that filed a restructuring petition for Puerto Rico last week, under Title III of the Puerto Rico Oversight, Management and Economic Stability Act, has estimated that Puerto Rico faces about $74 billion debt burden.
Public pension underfunding accounts for about two-thirds of Puerto Rico’s debt burden.
In mid-2015, only 1.57% of the public pension obligations were funded, according to the oversight board.
Judge Laura Taylor Swain is presiding over the restructuring process in the U.S. District Court for the District of Puerto Rico.
The Ad Hoc committee says its members represent pension plans that serve about 91,000 of Puerto Rico’s retirees. The committee has let all retiree organizations that wanted to participate in its activities join, and the members have signed declarations stating that they individually have accrued public plan pension benefits, the committee says.
The committee says the retirees need representation of their own in restructuring proceedings and should not have to let a committee for all unsecured creditors speak on their behalf.
“The claims of retirees will likely be in direct conflict with those of financial and trade creditors,” the Ad Hoc committee says.
An unsecured creditors committee that tried to represent both retirees and trade creditors would likely be rendered dysfunctional, the Ad Hoc committee says.
They committee says it has already undertaken representation responsibilities seriously, and that one way it has handled that role is to share information and ideas with AARP.
The committee says it is getting advice from lawyers at Clark Hill PLC, the law firm that represented the General Retirement System and the Police and Fire Retirement System in Detroit’s municipal restructuring case.
“However, to be clear,” the committee says, “the committee cannot afford to pay the legal fees of its counsel and is receiving legal services at present on a concessionary basis.”
— Read More in Debt Than Puerto Rico, the Virgin Islands Rejects Rescue on ThinkAdvisor.