•  Summary 
  •  
  •  Actions 
  •  
  •  Committee Votes 
  •  
  •  Floor Votes 
  •  
  •  Memo 
  •  
  •  Text 
  •  
  •  LFIN 
  •  
  •  Chamber Video/Transcript 

S05542 Summary:

BILL NOS05542A
 
SAME ASSAME AS A02970-A
 
SPONSORRIVERA
 
COSPNSRBRISPORT, CLEARE, COMRIE, GIANARIS, HOYLMAN-SIGAL, JACKSON, KRUEGER, MYRIE, RAMOS, SALAZAR, SANDERS
 
MLTSPNSR
 
Add Art 8 220 - 232, D & C L
 
Provides for restructuring unsustainable sovereign and subnational debt; provides a voluntary petition for relief may be filed with the state.
Go to top

S05542 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         5542--A
 
                               2023-2024 Regular Sessions
 
                    IN SENATE
 
                                      March 8, 2023
                                       ___________
 
        Introduced  by  Sens.  RIVERA, BRISPORT, CLEARE, COMRIE, GIANARIS, HOYL-
          MAN-SIGAL, KRUEGER, MYRIE, RAMOS, SALAZAR, SANDERS -- read  twice  and
          ordered  printed, and when printed to be committed to the Committee on
          Banks -- recommitted to the Committee  on  Banks  in  accordance  with
          Senate  Rule  6, sec. 8 -- committee discharged, bill amended, ordered
          reprinted as amended and recommitted to said committee
 
        AN ACT to amend the debtor and creditor law, in relation to  restructur-
          ing unsustainable sovereign and subnational debt
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Short title. This act shall be known and may  be  cited  as
     2  the "sovereign debt stability act".
     3    §  2. The debtor and creditor law is amended by adding a new article 8
     4  to read as follows:
     5                                  ARTICLE 8
     6                       SOVEREIGN AND SUBNATIONAL DEBT
     7  Section 220. Legislative intent.
     8          221. Definitions.
     9          222. Election to be covered by the provisions of this article.
    10          223. Petition for relief; recognition.
    11          224. Notification of creditors.
    12          225. Debt reconciliation.
    13          226. Submission, contents and voting on plan.
    14          227. Financing the restructuring.
    15          228. Priority of repayment.
    16          229. Adjudication of disputes.
    17          230. Recoverability of section 230 claims.
    18          231. Application; opt in.
    19          232. Severability.
    20    § 220. Legislative intent.  The legislature finds that it is  a  long-
    21  standing  policy  of the United States and the state of New York, as the
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD02418-09-4

        S. 5542--A                          2
 
     1  world's leading financial center, to support orderly, collaborative  and
     2  effective  international sovereign debt relief for countries with unsus-
     3  tainable levels of debt. Debt  distress,  debt  crises,  and  disorderly
     4  default  are  associated  with  unacceptable  human  suffering, economic
     5  decline, and financial market and payment systems disruption.  Moreover,
     6  debt  restructuring  is  ineffective  and  does  not lead to sustainable
     7  outcomes when it is not perceived as equitable or legitimate  by  stake-
     8  holders  in borrowing and lending countries. Additionally, public credi-
     9  tors are unlikely  to  participate  in  debt  restructuring  initiatives
    10  unless  there is fair burden sharing among all public and private credi-
    11  tors, which is essential to the legitimacy  and  effectiveness  of  debt
    12  relief  initiatives.  Therefore, the legislature finds and declares that
    13  it shall be the policy of New York state to support  international  debt
    14  relief  initiatives  for  countries to ensure that the cost of such debt
    15  relief is allocated in a fair and equitable manner, and that such  costs
    16  do  not  fall  disproportionately  on the residents and taxpayers of New
    17  York state, and for other purposes.  The purpose of this article  is  to
    18  provide effective mechanisms for restructuring sovereign and subnational
    19  debt so as to:
    20    1. reduce the social costs of sovereign and subnational debt crises to
    21  residents of New York state;
    22    2.  reduce  systemic  risk  to  the financial system, a system that is
    23  concentrated in New York state;
    24    3. reduce creditor uncertainty, including to the numerous  holders  of
    25  sovereign debt that are residents in New York state;
    26    4. strengthen the role of New York state as a primary location for the
    27  issuing and trading of sovereign debt;
    28    5.  reduce the need for sovereign and subnational debt bailouts, which
    29  create moral hazard and are costly to residents of New York state;
    30    6.  otherwise  protect  economic  activity  within  New  York  state's
    31  borders,  by  reducing  the likelihood of a sovereign debt default which
    32  could adversely impact New York state's economy;
    33    7. reduce, out of universal human rights and humanitarian imperatives,
    34  the social cost of unresolved  sovereign  debt  crises  imposed  on  the
    35  people  of nations with unsustainable debt, especially the poorest among
    36  them, taking due account of creditor rights; and
    37    8. enable debtor states to choose a  debt  restructuring  option  that
    38  appropriately suits its circumstances and needs.
    39    § 221. Definitions. For purposes of this article:
    40    1.  "creditor"  means  a  person  or entity that has a claim against a
    41  debtor state;
    42    2. "claim" means a payment claim against a  debtor  state  for  monies
    43  borrowed  or  for  the  debtor state's guarantee of, or other contingent
    44  obligation on, monies borrowed; the term "monies borrowed" shall include
    45  the following, whether or not it  represents  the  borrowing  of  money:
    46  monies  owing  under bonds; debentures; notes, or similar instruments of
    47  original maturity of at least one year; monies owing  for  the  deferred
    48  purchase  price of property or services, other than trade accounts paya-
    49  ble arising in the ordinary  course  of  government  operations;  monies
    50  owing  on capitalized lease obligations; monies owing on or with respect
    51  to letters of credit, bankers' acceptances, or other extensions of cred-
    52  it of original maturity of at least one year;
    53    3. "plan" means a debt restructuring  plan  pursuant  to  section  two
    54  hundred twenty-six of this article;

        S. 5542--A                          3
 
     1    4. "debtor state" means a sovereign nation; or unincorporated territo-
     2  ry;  or  any  subnational unit thereof, excluding any municipality whose
     3  adjustment or debts is governed by 11 U.S.C. 9;
     4    5.  "independent  monitor" means an individual appointed by the gover-
     5  nor, in consultation with the United States department of the  treasury,
     6  acceptable  to the sovereign debtor and to the holders, or their agents,
     7  of a majority of the obligations issued under New York  law.  The  inde-
     8  pendent  monitor  is  meant  to  facilitate  and encourage an effective,
     9  prompt and fair agreement by the parties, as intended by  this  article.
    10  The  debtor  state  shall pay the independent monitor's reasonable costs
    11  and expenses;
    12    6. "international initiative" means any mechanism, framework or initi-
    13  ative in which the United States government and other  sovereign  states
    14  have  engaged with international financial institutions and official and
    15  commercial creditors to advance the implementation  and  improvement  of
    16  prompt  and  effective  debt relief among eligible states, including but
    17  not limited to the Heavily Indebted Poor  Countries  Initiative  of  the
    18  International Monetary Fund and the World Bank, the Debt Service Suspen-
    19  sion Initiative of the Group of 20, the Common Framework for Debt Treat-
    20  ments  beyond  the DSSI, also known as the "Common Framework", the Paris
    21  Club, and any successor or similar international mechanism, framework or
    22  initiatives;
    23    7. "eligible claim" shall mean a claim as defined in  subdivision  two
    24  of  this  section and any judicial or other official domestic or foreign
    25  judgment with respect to such a claim against an eligible state  partic-
    26  ipating in one or more of the international initiatives;
    27    8.  "eligible  state" shall mean a sovereign state eligible to partic-
    28  ipate in one or more of the international initiatives;
    29    9. "burden-sharing standards" shall mean standards set by the relevant
    30  international initiative  or  international  initiatives  for  equitable
    31  burden-sharing  among all creditors with material claims on each partic-
    32  ipating debtor without regard for their  official,   private, or  hybrid
    33  status;
    34    10.  "section  223  claim"  shall  mean,  as  applicable, a claim with
    35  respect to which the debtor state has  elected  for  its  claims  to  be
    36  covered  by section two hundred twenty-three through section two hundred
    37  twenty-nine of this article; and
    38    11. "section 230 claim" shall mean an eligible claim with  respect  to
    39  which  the  debtor state issuing such claim has elected to be covered by
    40  section two hundred thirty of this article, and not  to  be  covered  by
    41  section two hundred twenty-three through section two hundred twenty-nine
    42  of this article inclusive.
    43    §  222.  Election  to be covered by the provisions of this article. 1.
    44  Any debtor state against which there are one or more claims governed  by
    45  or  enforced  under  New  York  law  shall  have the option to apply the
    46  provisions of this article to such claims by  filing  a  notice  thereof
    47  with  the  state  of  New  York.  In such notice, the debtor state shall
    48  choose whether those claims shall, to the extent governed  by  New  York
    49  law,  be  covered as section 223 claims or, to the extent enforced under
    50  New York law, as section 230 claims. Within  thirty  days  after  giving
    51  such  notice,  the  debtor state shall notify the holders of such claims
    52  and the state of New York of its choice. In the case of a choice to have
    53  those claims be covered as a section 223 claim, the debtor  state  shall
    54  also make the certifications specified in subdivision two of section two
    55  hundred  twenty-three  of this article.  Any waiver of the provisions of
    56  this subdivision shall be ineffective.

        S. 5542--A                          4
 
     1    2. A debtor state that makes a choice under subdivision  one  of  this
     2  section  shall  have  the  right to change that choice once, at any time
     3  prior to a plan becoming effective and binding on the debtor  state  and
     4  its creditors, by notifying the state of New York and the holders of all
     5  claims affected by that choice.
     6    §  223.  Petition  for  relief; recognition. 1. The notification under
     7  section two hundred twenty-two of this article  that  claims  against  a
     8  debtor  state shall be covered as a section 223 claim shall constitute a
     9  voluntary petition for relief with the state of New York.
    10    2. Such notice shall certify that the debtor state:
    11    (a) seeks relief as a section 223 claim under this  article,  and  has
    12  not  previously sought relief under this article, or under any other law
    13  that is substantially in the form of this article, during the past  five
    14  years;
    15    (b) needs relief as a section 223 claim under this article to restruc-
    16  ture  claims  that,  absent  such relief, would constitute unsustainable
    17  debt of the debtor state;
    18    (c) agrees to restructure those claims in accordance with this section
    19  through section two hundred twenty-nine of this article;
    20    (d) agrees to all other  terms,  conditions  and  provisions  of  this
    21  section through section two hundred twenty-nine of this article;
    22    (e)  has duly enacted any national or subnational law needed to effec-
    23  tuate these agreements. If requested by the  independent  monitor,  such
    24  petition  shall  also  attach  documents  and  legal opinions evidencing
    25  compliance with this subdivision; and
    26    (f) is cooperating with the International Monetary Fund to  devise  an
    27  effective, efficient, timely and fair path back to sustainability.
    28    3. Immediately after such a petition for relief has been filed, and so
    29  long  as  such  filing has not been dismissed by the independent monitor
    30  for lack of good faith or the debtor state has not  changed  its  choice
    31  under  subdivision two of section two hundred twenty-two of this article
    32  to have its claims covered by section  two hundred thirty of this  arti-
    33  cle, the terms, conditions, and provisions of this article shall:
    34    (a) apply to the debtor-creditor relationship between the debtor state
    35  and its creditors to the extent such relationship is governed by the law
    36  of this jurisdiction;
    37    (b) apply to the debtor-creditor relationship between the debtor state
    38  and its creditors to the extent such relationship is governed by the law
    39  of  another  jurisdiction that has enacted law substantially in the form
    40  of this article; and
    41    (c) be recognized in,  and  by,  all  other  jurisdictions  that  have
    42  enacted law substantially in the form of this article.
    43    §  224. Notification of creditors.  1. Within thirty days after filing
    44  its petition for relief, the debtor state shall notify all of its  known
    45  creditors of its intention to negotiate a plan under section two hundred
    46  twenty-three through section two hundred twenty-nine of this article.
    47    2.  The  independent monitor shall prepare and maintain a current list
    48  of creditors of the debtor state and verify claims for the  purposes  of
    49  supervising  voting  under  section  two  hundred  twenty-three  through
    50  section two hundred twenty-nine of this article.
    51    § 225.  Debt reconciliation. The creditor claims shall  be  reconciled
    52  against  debtor records and any discrepancies shall be addressed between
    53  the parties.
    54    § 226. Submission, contents and voting on plan. 1.  The  debtor  state
    55  may  submit a plan to its creditors at any time, and may submit alterna-
    56  tive plans from time to time.

        S. 5542--A                          5
 
     1    2. No other person or entity may submit a plan on behalf of the debtor
     2  state.
     3    3. A plan shall:
     4    (a)  designate classes of claims in accordance with subdivision six of
     5  this section;
     6    (b) specify the proposed treatment of each class of claims;
     7    (c) provide the same treatment for each claim of a  particular  class,
     8  unless the holder of a claim agrees to a less favorable treatment;
     9    (d) disclose any claims not included in the plan's classes of claims;
    10    (e)  provide  adequate  means for the plan's implementation including,
    11  with respect to any claims, curing or waiving any defaults  or  changing
    12  the  maturity  dates, principal amount, interest rate, or other terms or
    13  canceling or modifying any liens or encumbrances; and
    14    (f) certify that, if the plan becomes effective  and  binding  on  the
    15  debtor  state  and its creditors under subdivision four of this section,
    16  the debtor state's debt will become sustainable.
    17    4. A plan shall become effective and binding on the debtor  state  and
    18  its  creditors when it has been submitted by the debtor state and agreed
    19  to by each class of such creditors' claims designated in the plan  under
    20  subdivision  three of this section. Thereupon, the debtor state shall be
    21  discharged from all claims included in those classes of  claims,  except
    22  as provided in the plan.
    23    5.  A  class  of  claims  has agreed to a plan if creditors holding at
    24  least two-thirds in amount and more  than  one-half  in  number  of  the
    25  claims  of  such  class  voting  on such plan agree to the plan, without
    26  counting claims owned by the debtor state or entities it controls.
    27    6. Each class of claims shall consist of  claims  against  the  debtor
    28  state that are equal in priority, provided that:
    29    (a) equal priority claims need not all be included in the same class;
    30    (b)  claims  of  governmental  or  multi-governmental entities holding
    31  claims each shall be classed separately;
    32    (c) claims that are governed by this article or  the  law  of  another
    33  jurisdiction that is substantially in the form of this article shall not
    34  be classed with other claims; and
    35    (d)  the  fact that a claim arises under, or is supported or evidenced
    36  by, a judicial or other official domestic or foreign judgment shall  not
    37  in  and of itself mean that such claim is not equal in priority to other
    38  claims.
    39    § 227. Financing the restructuring. 1. Subject to subdivision three of
    40  this section the debtor state shall have the right to  borrow  money  on
    41  such terms and conditions as it deems appropriate.
    42    2.  The  debtor  state  shall notify all of its known creditors of its
    43  intention to borrow under subdivision one of this section, the terms and
    44  conditions of the borrowing, and the proposed use of the loan  proceeds.
    45  Such  notice  shall  also direct those creditors to respond to the inde-
    46  pendent monitor within thirty days as to whether they approve or  disap-
    47  prove of such loan.
    48    3.  Any such loan shall be approved by creditors holding at least two-
    49  thirds in amount of the claims of creditors responding to the  independ-
    50  ent monitor within that thirty-day period.
    51    4.  In order for the priority of repayment, and corresponding subordi-
    52  nation, under section two hundred twenty-eight of  this  article  to  be
    53  effective,  any  such  loan  shall additionally be approved by creditors
    54  holding at least two-thirds in principal amount of the covered claims of
    55  the creditors responding to the independent monitor within that  thirty-
    56  day period. Claims shall be deemed to be covered if they are governed by

        S. 5542--A                          6
 
     1  this article or by the law of another jurisdiction that is substantially
     2  in the form of this article.
     3    §  228.  Priority  of repayment. 1. The debtor state shall repay loans
     4  approved under section two hundred twenty-seven of this article prior to
     5  paying any other claims.
     6    2. The claims of creditors of the debtor state are subordinated to the
     7  extent needed to effectuate the priority  payment  under  this  section.
     8  Such claims are not subordinated for any other purpose.
     9    3.  The  priority  of  payment, and corresponding subordination, under
    10  this section is expressly subject to the  approval  by  creditors  under
    11  subdivision four of section two hundred twenty-seven of this article.
    12    §  229. Adjudication of disputes.  The independent monitor may request
    13  that a court of competent jurisdiction appoint a referee  or  a  special
    14  master  to make recommendations to the court regarding the resolution of
    15  any disputes arising under a section 223 claim under this article.
    16    § 230. Recoverability of section 230 claims.  Any  section  230  claim
    17  incurred prior to the date of an eligible state's application to partic-
    18  ipate  in  one or more international initiatives shall only be recovera-
    19  ble:
    20    1. to the extent that it comports with burden-sharing standards;
    21    2. provided it meets robust disclosure standards, including intercred-
    22  itor data sharing and a broad presumption in favor of public  disclosure
    23  of material terms and conditions of such claims; and
    24    3.    only  up to the proportion of the eligible claim that would have
    25  been recoverable by the  United  States  federal  government  under  the
    26  applicable international initiative if the United States federal govern-
    27  ment    had  been  the  creditor holding the eligible claim, and without
    28  regard to de minimis clauses.
    29    § 231. Application; opt in. 1.  Where this article applies,  it  shall
    30  operate  both  retroactively and prospectively and, without limiting the
    31  foregoing, shall  with  respect  to  section  223  claims  override  any
    32  contractual provisions that are inconsistent with the provisions of this
    33  article.   Notwithstanding the foregoing, the provisions of this article
    34  shall not operate retroactively as to debtor states that are not  sover-
    35  eign nations.
    36    2.  Any  creditors  of  a  debtor state whose claims are not otherwise
    37  governed by this article may contractually  opt  in  to  this  article's
    38  terms, conditions, and provisions.
    39    3.  The  terms, conditions, and provisions of this article shall apply
    40  to the debtor-creditor relationship between the debtor state and  credi-
    41  tors  opting  in  under  subdivision  two  of  this  section  as if such
    42  relationship were governed by the laws of New York state under  subdivi-
    43  sion three of section two hundred twenty-three of this article.
    44    § 232. Severability. If any  provision of this article or its applica-
    45  tion  to  any  person  or   circumstance is held invalid, the invalidity
    46  shall not affect other provisions or applications of this article  which
    47  can  be  given  effect without the invalid provision or application, and
    48  to  this end, the provisions of  this  article  are  severable.  Without
    49  limiting  the  foregoing, a debtor state's choice to have claims covered
    50  as a section 223 claim shall be valid even if its choice to have  claims
    51  covered  as  a  section  230 claim of this article would be invalid, and
    52  vice versa.
    53    § 3. This act shall take effect immediately.
Go to top