(Bloomberg) -- A federal oversight board given the task of stabilizing Puerto Rico’s debt crisis wants a U.S. court to temporarily postpone legal suits against the commonwealth that seek repayment of debt.
The seven-member panel Friday filed its stance on a provision within a federal law, called Promesa, which shields Puerto Rico from creditor lawsuits through Feb. 15. The board’s position echoes the commonwealth’s belief that the legal stay should remain in place. U.S. District Judge Francisco Besosa will rule on whether it should be lifted. The board said lawsuits should be postponed while it begins its task, required under Promesa, of restructuring the island’s $70 billion in debt and ending chronic budget deficits.
“Ongoing litigation is a major distraction that interferes with the oversight board’s congressional mandate and that all parties’ time and resources would be better spent negotiating the fiscal plans required by Promesa,” lawyers for the board wrote in a legal filing submitted Friday.
Promesa allows the board to intervene on legal actions against Puerto Rico and its localities. The panel this week began its search for outside legal advisers and strategic consultants to help address the commonwealth’s financial challenges. It’s held two meetings since President Barack Obama formed the panel on Aug. 31.
Puerto Rico’s fiscal 2017 budget, which ends June 30, doesn’t include principal and interest payments. The island has skipped about $1.8 billion of bond payments since it began defaulting in August 2015, including on general-obligation debt, which its constitution stipulates must be repaid before other expenses.
Investors and bond-insurance companies have filed suit against Governor Alejandro Garcia Padilla, seeking to overturn the island’s debt moratorium law and stop the administration from re-directing revenue away from bondholders. Besosa last month heard testimony from the different parties on the stay, with outside advisers for Puerto Rico claiming the island needs a temporary suspension from legal battles while it restructures its debt.
“The monetary harm to the plaintiffs caused by leaving the stay in place is far outweighed by the harm that will befall the commonwealth and the disruptive effect that ongoing litigation will have on the oversight board’s monumental task,” the board’s lawyers wrote in the court filing.