Bill Text: NY S05542 | 2023-2024 | General Assembly | Introduced

NOTE: There are more recent revisions of this legislation. Read Latest Draft

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Bill Title: Provides for restructuring unsustainable sovereign and subnational debt; provides a voluntary petition for relief may be filed with the state.

Spectrum: Partisan Bill (Democrat 12-0)

Status: (Introduced) 2024-02-28 - PRINT NUMBER 5542A [S05542 Detail]

Download: New_York-2023-S05542-Introduced.html

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                STATE OF NEW YORK
        ________________________________________________________________________

                                          5542

                               2023-2024 Regular Sessions

                    IN SENATE

                                      March 8, 2023
                                       ___________

        Introduced  by  Sens.  RIVERA, BRISPORT, CLEARE, GIANARIS, MYRIE, RAMOS,
          SALAZAR, SANDERS -- read twice and ordered printed, and  when  printed
          to be committed to the Committee on Banks

        AN ACT to amend the banking law, in relation to restructuring unsustain-
          able 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. The banking law is amended by adding a  new  article  7  to
     2  read as follows:
     3                                  ARTICLE 7
     4                       SOVEREIGN AND SUBNATIONAL DEBT
     5  Section 300. Legislative intent.
     6          301. Definitions.
     7          302. Petition for relief; recognition.
     8          303. Notification of creditors.
     9          304. Debt reconciliation.
    10          305. Submission, contents and voting on plan.
    11          306. Financing the restructuring.
    12          307. Priority of repayment.
    13          308. Adjudication of disputes.
    14          309. Application; opt in.
    15    §  300.  Legislative intent. The purpose of this article is to provide
    16  effective  mechanisms  for  restructuring  unsustainable  sovereign  and
    17  subnational debt so as to:
    18    1. reduce the social costs of sovereign and subnational debt crises to
    19  residents of this state;
    20    2.  reduce  systemic  risk  to  the financial system, a system that is
    21  concentrated in this state;
    22    3. reduce creditor uncertainty, including to the numerous  holders  of
    23  sovereign debt that are residents in this state;

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD02418-03-3
        S. 5542                             2

     1    4.  strengthen the role of the state of New York as a primary location
     2  for the issuing and trading of sovereign debt;
     3    5.  reduce the need for sovereign and subnational debt bailouts, which
     4  create moral hazard and are costly to residents of this state;
     5    6. otherwise protect economic activity within this state's borders, by
     6  reducing the likelihood of a sovereign debt default which could adverse-
     7  ly impact the state's economy; and
     8    7. reduce, out of universal human rights and humanitarian imperatives,
     9  the social cost of unresolved  sovereign  debt  crises  imposed  on  the
    10  people  of  insolvent nations, especially the poorest among them, taking
    11  due account of creditor rights.
    12    § 301. Definitions. For purposes of this article:
    13    1. "creditor" means a person or entity that  has  a  claim  against  a
    14  state;
    15    2.  "claim"  means a payment claim against a state for monies borrowed
    16  or for the state's guarantee of,  or  other  contingent  obligation  on,
    17  monies borrowed; the term "monies borrowed" shall include the following,
    18  whether or not it represents the borrowing of money:  monies owing under
    19  bonds; debentures; notes, or similar instruments of original maturity of
    20  at least one year; monies owing for the deferred purchase price of prop-
    21  erty or services, other than trade accounts payable arising in the ordi-
    22  nary  course of government operations; monies owing on capitalized lease
    23  obligations; monies owing on or with respect to letters of credit, bank-
    24  ers' acceptances, or other extensions of credit of original maturity  of
    25  at least one year;
    26    3.  "plan"  means  a  debt  restructuring plan contemplated by section
    27  three hundred five of this article;
    28    4. "state" means a sovereign nation; or unincorporated  territory;  or
    29  any  subnational  unit thereof, excluding any municipality whose adjust-
    30  ment or debts is governed by 11 U.S.C. 9; and
    31    5. "independent monitor" means an individual appointed by the governor
    32  and acceptable to the sovereign debtor and  to  the  holders,  or  their
    33  agents,  of a majority of the obligations issued under New York law. The
    34  monitor is meant to facilitate and encourage an  effective,  prompt  and
    35  fair agreement by the parties, as intended by this article.
    36    §  302. Petition for relief; recognition. 1. A state may invoke appli-
    37  cation of this article by filing a voluntary petition  for  relief  with
    38  the state of New York.
    39    2. Such petition shall certify that the state:
    40    (a)  seeks  relief  under  this article, and has not previously sought
    41  relief under this article, or under any other law that is  substantially
    42  in the form of this article, during the past ten years;
    43    (b) needs relief under this article to restructure claims that, absent
    44  such relief, would constitute unsustainable debt of the state;
    45    (c)  agrees  to restructure those claims in accordance with this arti-
    46  cle;
    47    (d) agrees to all other terms, conditions and provisions of this arti-
    48  cle;
    49    (e) has duly enacted any national or subnational law needed to  effec-
    50  tuate  these  agreements.  If requested by the independent monitor, such
    51  petition shall also  attach  documents  and  legal  opinions  evidencing
    52  compliance with this paragraph; and
    53    (f)  is  cooperating with the International Monetary Fund to devise an
    54  effective, efficient, timely and fair path back to sustainability.
    55    3. Immediately after such a petition for relief has been filed, and so
    56  long as such filing has not been dismissed by  the  independent  monitor
        S. 5542                             3

     1  for  lack  of  good faith, the terms, conditions, and provisions of this
     2  article shall:
     3    (a)  apply  to  the debtor-creditor relationship between the state and
     4  its creditors to the extent such relationship is governed by the law  of
     5  this jurisdiction;
     6    (b)  apply  to  the debtor-creditor relationship between the state and
     7  its creditors to the extent such relationship is governed by the law  of
     8  another  jurisdiction  that has enacted law substantially in the form of
     9  this article; and
    10    (c) be recognized in,  and  by,  all  other  jurisdictions  that  have
    11  enacted law substantially in the form of this article.
    12    §  303. Notification of creditors.  1. Within thirty days after filing
    13  its petition for relief, the state shall notify all of its known  credi-
    14  tors of its intention to negotiate a plan under this article.
    15    2.  The  independent monitor shall prepare and maintain a current list
    16  of creditors of the state and verify claims for the purposes  of  super-
    17  vising voting under this article.
    18    §  304.   Debt reconciliation. The creditor claims shall be reconciled
    19  against debtor records and any discrepancies shall be addressed  between
    20  the parties.
    21    §  305.  Submission,  contents  and  voting  on plan. 1. The state may
    22  submit a plan to its creditors at any time, and may  submit  alternative
    23  plans from time to time.
    24    2. No other person or entity may submit a plan on behalf of the state.
    25    3. A plan shall:
    26    (a)  designate classes of claims in accordance with subdivision six of
    27  this section;
    28    (b) specify the proposed treatment of each class of claims;
    29    (c) provide the same treatment for each claim of a  particular  class,
    30  unless the holder of a claim agrees to a less favorable treatment;
    31    (d) disclose any claims not included in the plan's classes of claims;
    32    (e)  provide  adequate  means for the plan's implementation including,
    33  with respect to any claims, curing or waiving any defaults  or  changing
    34  the  maturity  dates, principal amount, interest rate, or other terms or
    35  canceling or modifying any liens or encumbrances; and
    36    (f) certify that, if the plan becomes effective  and  binding  on  the
    37  state  and  its  creditors  under  subdivision four of this section, the
    38  state's debt will become sustainable.
    39    4. A plan shall become effective and binding  on  the  state  and  its
    40  creditors  when it has been submitted by the state and agreed to by each
    41  class of such creditors' claims designated in the plan under subdivision
    42  three of this section. Thereupon, the state shall be discharged from all
    43  claims included in those classes of claims, except as  provided  in  the
    44  plan.
    45    5.  A  class  of  claims  has agreed to a plan if creditors holding at
    46  least two-thirds in amount and more  than  one-half  in  number  of  the
    47  claims of such class voting on such plan agree to the plan.
    48    6. Each class of claims shall consist of claims against the state that
    49  are equal in priority, provided that:
    50    (a) equal claims need not all be included in the same class;
    51    (b)  claims  of  governmental  or  multi-governmental entities holding
    52  claims defined under this article shall be included with the  claims  of
    53  private  holders  of  such claims, and each shall be classed separately;
    54  and
        S. 5542                             4

     1    (c) claims that are governed by this article or  the  law  of  another
     2  jurisdiction that is substantially in the form of this article shall not
     3  be classed with other claims.
     4    § 306. Financing the restructuring. 1. Subject to subdivision three of
     5  this  section  the  state  shall  have the right to borrow money on such
     6  terms and conditions as it deems appropriate.
     7    2. The state shall notify all of its known creditors of its  intention
     8  to  borrow  under  subdivision one of this section, the terms and condi-
     9  tions of the borrowing, and the proposed use of the loan proceeds.  Such
    10  notice  shall  also direct those creditors to respond to the independent
    11  monitor within thirty days as to whether they approve or  disapprove  of
    12  such loan.
    13    3.  Any such loan shall be approved by creditors holding at least two-
    14  thirds in amount of the claims of creditors responding to the  independ-
    15  ent monitor within that thirty-day period.
    16    4.  In order for the priority of repayment, and corresponding subordi-
    17  nation, under section three hundred seven of this article to  be  effec-
    18  tive,  any such loan shall additionally be approved by creditors holding
    19  at least two-thirds in principal amount of the  covered  claims  of  the
    20  creditors  responding  to the independent monitor within that thirty-day
    21  period. Claims shall be deemed to be covered if  they  are  governed  by
    22  this article or by the law of another jurisdiction that is substantially
    23  in the form of this article.
    24    §  307. Priority of repayment. 1. The state shall repay loans approved
    25  under this article prior to paying any other claims.
    26    2. The claims of creditors of the state are subordinated to the extent
    27  needed to effectuate the priority payment  under  this  section.    Such
    28  claims are not subordinated for any other purpose.
    29    3.  The  priority  of  payment, and corresponding subordination, under
    30  this section is expressly subject to the  approval  by  creditors  under
    31  subdivision four of section three hundred six of this article.
    32    §  308. Adjudication of disputes.  The independent monitor may request
    33  that a court of competent jurisdiction appoint a referee  or  a  special
    34  master  to make recommendations to the court regarding the resolution of
    35  any disputes arising under this article.
    36    § 309. Application; opt in. 1. This article applies where, by contract
    37  or otherwise;
    38    (a) the law of New York state governs the debtor-creditor relationship
    39  between a state and its creditors; and
    40    (b) the application of this article  is  invoked  in  accordance  with
    41  section three hundred two of this article.
    42    2.  Where  this  article  applies, it shall operate retroactively and,
    43  without  limiting  the  foregoing,  shall   override   any   contractual
    44  provisions that are inconsistent with the provisions of this article.
    45    3.  Any creditors of the state whose claims are not otherwise governed
    46  by this article may contractually opt in to this article's terms, condi-
    47  tions, and provisions.
    48    4. The terms, conditions, and provisions of this article  shall  apply
    49  to  the  debtor-creditor  relationship  between  the state and creditors
    50  opting in under subdivision one of this section as if such  relationship
    51  were  governed  by the laws of New York state under subdivision three of
    52  section three hundred two of this article.
    53    § 2. This act shall take effect immediately.