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A07786 Summary:

BILL NOA07786
 
SAME ASSAME AS S02333
 
SPONSORDavila
 
COSPNSRHyndman, Gonzalez-Rojas, Simon, Ramos, Romero, Rosenthal, Lunsford, Kelles, Forrest, Levenberg, Sayegh, Meeks, Gallagher
 
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.
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A07786 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          7786
 
                               2025-2026 Regular Sessions
 
                   IN ASSEMBLY
 
                                     April 10, 2025
                                       ___________
 
        Introduced  by  M.  of A. DAVILA, HYNDMAN, GONZALEZ-ROJAS, SIMON, RAMOS,
          ROMERO, ROSENTHAL, LUNSFORD, KELLES,  FORREST,  LEVENBERG,  SAYEGH  --
          read once and referred to the Committee on Judiciary
 
        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
    22  world's  leading financial center, to support orderly, collaborative and
    23  effective international sovereign debt relief for countries with  unsus-
    24  tainable  levels  of  debt.  Debt  distress, debt crises, and disorderly
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD05664-01-5

        A. 7786                             2
 
     1  default are  associated  with  unacceptable  human  suffering,  economic
     2  decline,  and financial market and payment systems disruption. Moreover,
     3  debt restructuring is ineffective  and  does  not  lead  to  sustainable
     4  outcomes  when  it is not perceived as equitable or legitimate by stake-
     5  holders in borrowing and lending countries. Additionally, public  credi-
     6  tors  are  unlikely  to  participate  in  debt restructuring initiatives
     7  unless there is fair burden sharing among all public and private  credi-
     8  tors,  which  is  essential  to the legitimacy and effectiveness of debt
     9  relief initiatives. Therefore, the legislature finds and  declares  that
    10  it  shall  be the policy of New York state to support international debt
    11  relief initiatives for countries to ensure that the cost  of  such  debt
    12  relief  is allocated in a fair and equitable manner, and that such costs
    13  do not fall disproportionately on the residents  and  taxpayers  of  New
    14  York  state,  and for other purposes.  The purpose of this article is to
    15  provide effective mechanisms for restructuring sovereign and subnational
    16  debt so as to:
    17    1. reduce the social costs of sovereign and subnational debt crises to
    18  residents of New York state;
    19    2. reduce systemic risk to the financial  system,  a  system  that  is
    20  concentrated in New York state;
    21    3.  reduce  creditor uncertainty, including to the numerous holders of
    22  sovereign debt that are residents in New York state;
    23    4. strengthen the role of New York state as a primary location for the
    24  issuing and trading of sovereign debt;
    25    5. reduce the need for sovereign and subnational debt bailouts,  which
    26  create moral hazard and are costly to residents of New York state;
    27    6.  otherwise  protect  economic  activity  within  New  York  state's
    28  borders, by reducing the likelihood of a sovereign  debt  default  which
    29  could adversely impact New York state's economy;
    30    7. reduce, out of universal human rights and humanitarian imperatives,
    31  the  social  cost  of  unresolved  sovereign  debt crises imposed on the
    32  people of nations with unsustainable debt, especially the poorest  among
    33  them, taking due account of creditor rights; and
    34    8.  enable  debtor  states  to choose a debt restructuring option that
    35  appropriately suits its circumstances and needs.
    36    § 221. Definitions. For purposes of this article:
    37    1. "creditor" means a person or entity that  has  a  claim  against  a
    38  debtor state;
    39    2.  "claim"  means  a  payment claim against a debtor state for monies
    40  borrowed or for the debtor state's guarantee  of,  or  other  contingent
    41  obligation on, monies borrowed; the term "monies borrowed" shall include
    42  the  following,  whether  or  not  it represents the borrowing of money:
    43  monies owing under bonds; debentures; notes, or similar  instruments  of
    44  original  maturity  of  at least one year; monies owing for the deferred
    45  purchase price of property or services, other than trade accounts  paya-
    46  ble  arising  in  the  ordinary  course of government operations; monies
    47  owing on capitalized lease obligations; monies owing on or with  respect
    48  to letters of credit, bankers' acceptances, or other extensions of cred-
    49  it of original maturity of at least one year;
    50    3.  "plan"  means  a  debt  restructuring plan pursuant to section two
    51  hundred twenty-six of this article;
    52    4. "debtor state" means a sovereign nation; or unincorporated territo-
    53  ry; or any subnational unit thereof, excluding  any  municipality  whose
    54  adjustment or debts is governed by 11 U.S.C. 9;
    55    5.  "independent  monitor" means an individual appointed by the gover-
    56  nor, in consultation with the United States department of the  treasury,

        A. 7786                             3
 
     1  acceptable  to the sovereign debtor and to the holders, or their agents,
     2  of a majority of the obligations issued under New York  law.  The  inde-
     3  pendent  monitor  is  meant  to  facilitate  and encourage an effective,
     4  prompt  and  fair agreement by the parties, as intended by this article.
     5  The debtor state shall pay the independent  monitor's  reasonable  costs
     6  and expenses;
     7    6. "international initiative" means any mechanism, framework or initi-
     8  ative  in  which the United States government and other sovereign states
     9  have engaged with international financial institutions and official  and
    10  commercial  creditors  to  advance the implementation and improvement of
    11  prompt and effective debt relief among eligible  states,  including  but
    12  not  limited  to  the  Heavily Indebted Poor Countries Initiative of the
    13  International Monetary Fund and the World Bank, the Debt Service Suspen-
    14  sion Initiative of the Group of 20, the Common Framework for Debt Treat-
    15  ments beyond the DSSI, also known as the "Common Framework",  the  Paris
    16  Club, and any successor or similar international mechanism, framework or
    17  initiatives;
    18    7.  "eligible  claim" shall mean a claim as defined in subdivision two
    19  of this section and any judicial or other official domestic  or  foreign
    20  judgment  with respect to such a claim against an eligible state partic-
    21  ipating in one or more of the international initiatives;
    22    8. "eligible state" shall mean a sovereign state eligible  to  partic-
    23  ipate in one or more of the international initiatives;
    24    9. "burden-sharing standards" shall mean standards set by the relevant
    25  international  initiative  or  international  initiatives  for equitable
    26  burden-sharing among all creditors with material claims on each  partic-
    27  ipating  debtor  without regard for their  official,  private, or hybrid
    28  status;
    29    10. "section 223 claim"  shall  mean,  as  applicable,  a  claim  with
    30  respect  to  which  the  debtor  state  has elected for its claims to be
    31  covered by section two hundred twenty-three through section two  hundred
    32  twenty-nine of this article; and
    33    11.  "section  230 claim" shall mean an eligible claim with respect to
    34  which the debtor state issuing such claim has elected to be  covered  by
    35  section  two  hundred  thirty  of this article, and not to be covered by
    36  section two hundred twenty-three through section two hundred twenty-nine
    37  of this article inclusive.
    38    § 222. Election to be covered by the provisions of  this  article.  1.
    39  Any  debtor state against which there are one or more claims governed by
    40  or enforced under New York law  shall  have  the  option  to  apply  the
    41  provisions  of  this  article  to such claims by filing a notice thereof
    42  with the state of New York. In  such  notice,  the  debtor  state  shall
    43  choose  whether  those  claims shall, to the extent governed by New York
    44  law, be covered as section 223 claims or, to the extent  enforced  under
    45  New  York  law,  as  section 230 claims. Within thirty days after giving
    46  such notice, the debtor state shall notify the holders  of  such  claims
    47  and the state of New York of its choice. In the case of a choice to have
    48  those  claims  be covered as a section 223 claim, the debtor state shall
    49  also make the certifications specified in subdivision two of section two
    50  hundred twenty-three of this article.  Any waiver of the  provisions  of
    51  this subdivision shall be ineffective.
    52    2.  A  debtor  state that makes a choice under subdivision one of this
    53  section shall have the right to change that choice  once,  at  any  time
    54  prior  to  a plan becoming effective and binding on the debtor state and
    55  its creditors, by notifying the state of New York and the holders of all
    56  claims affected by that choice.

        A. 7786                             4
 
     1    § 223. Petition for relief; recognition.  1.  The  notification  under
     2  section  two  hundred  twenty-two  of this article that claims against a
     3  debtor state shall be covered as a section 223 claim shall constitute  a
     4  voluntary petition for relief with the state of New York.
     5    2. Such notice shall certify that the debtor state:
     6    (a)  seeks  relief  as a section 223 claim under this article, and has
     7  not previously sought relief under this article, or under any other  law
     8  that  is substantially in the form of this article, during the past five
     9  years;
    10    (b) needs relief as a section 223 claim under this article to restruc-
    11  ture claims that, absent such  relief,  would  constitute  unsustainable
    12  debt of the debtor state;
    13    (c) agrees to restructure those claims in accordance with this section
    14  through section two hundred twenty-nine of this article;
    15    (d)  agrees  to  all  other  terms,  conditions and provisions of this
    16  section through section two hundred twenty-nine of this article;
    17    (e) has duly enacted any national or subnational law needed to  effec-
    18  tuate  these  agreements.  If requested by the independent monitor, such
    19  petition shall also  attach  documents  and  legal  opinions  evidencing
    20  compliance with this subdivision; and
    21    (f)  is  cooperating with the International Monetary Fund to devise an
    22  effective, efficient, timely and fair path back to sustainability.
    23    3. Immediately after such a petition for relief has been filed, and so
    24  long as such filing has not been dismissed by  the  independent  monitor
    25  for  lack  of  good faith or the debtor state has not changed its choice
    26  under subdivision two of section two hundred twenty-two of this  article
    27  to  have its claims covered by section  two hundred thirty of this arti-
    28  cle, the terms, conditions, and provisions of this article shall:
    29    (a) apply to the debtor-creditor relationship between the debtor state
    30  and its creditors to the extent such relationship is governed by the law
    31  of this jurisdiction;
    32    (b) apply to the debtor-creditor relationship between the debtor state
    33  and its creditors to the extent such relationship is governed by the law
    34  of another jurisdiction that has enacted law substantially in  the  form
    35  of this article; and
    36    (c)  be  recognized  in,  and  by,  all  other jurisdictions that have
    37  enacted law substantially in the form of this article.
    38    § 224. Notification of creditors.  1. Within thirty days after  filing
    39  its  petition for relief, the debtor state shall notify all of its known
    40  creditors of its intention to negotiate a plan under section two hundred
    41  twenty-three through section two hundred twenty-nine of this article.
    42    2. The independent monitor shall prepare and maintain a  current  list
    43  of  creditors  of the debtor state and verify claims for the purposes of
    44  supervising  voting  under  section  two  hundred  twenty-three  through
    45  section two hundred twenty-nine of this article.
    46    §  225.   Debt reconciliation. The creditor claims shall be reconciled
    47  against debtor records and any discrepancies shall be addressed  between
    48  the parties.
    49    §  226.  Submission,  contents and voting on plan. 1. The debtor state
    50  may submit a plan to its creditors at any time, and may submit  alterna-
    51  tive plans from time to time.
    52    2. No other person or entity may submit a plan on behalf of the debtor
    53  state.
    54    3. A plan shall:
    55    (a)  designate classes of claims in accordance with subdivision six of
    56  this section;

        A. 7786                             5
 
     1    (b) specify the proposed treatment of each class of claims;
     2    (c)  provide  the same treatment for each claim of a particular class,
     3  unless the holder of a claim agrees to a less favorable treatment;
     4    (d) disclose any claims not included in the plan's classes of claims;
     5    (e) provide adequate means for the  plan's  implementation  including,
     6  with  respect  to any claims, curing or waiving any defaults or changing
     7  the maturity dates, principal amount, interest rate, or other  terms  or
     8  canceling or modifying any liens or encumbrances; and
     9    (f)  certify  that,  if  the plan becomes effective and binding on the
    10  debtor state and its creditors under subdivision four of  this  section,
    11  the debtor state's debt will become sustainable.
    12    4.  A  plan shall become effective and binding on the debtor state and
    13  its creditors when it has been submitted by the debtor state and  agreed
    14  to  by each class of such creditors' claims designated in the plan under
    15  subdivision three of this section. Thereupon, the debtor state shall  be
    16  discharged  from  all claims included in those classes of claims, except
    17  as provided in the plan.
    18    5. A class of claims has agreed to a  plan  if  creditors  holding  at
    19  least  two-thirds  in  amount  and  more  than one-half in number of the
    20  claims of such class voting on such plan  agree  to  the  plan,  without
    21  counting claims owned by the debtor state or entities it controls.
    22    6.  Each  class  of  claims shall consist of claims against the debtor
    23  state that are equal in priority, provided that:
    24    (a) equal priority claims need not all be included in the same class;
    25    (b) claims of  governmental  or  multi-governmental  entities  holding
    26  claims each shall be classed separately;
    27    (c)  claims  that  are  governed by this article or the law of another
    28  jurisdiction that is substantially in the form of this article shall not
    29  be classed with other claims; and
    30    (d) the fact that a claim arises under, or is supported  or  evidenced
    31  by,  a judicial or other official domestic or foreign judgment shall not
    32  in and of itself mean that such claim is not equal in priority to  other
    33  claims.
    34    § 227. Financing the restructuring. 1. Subject to subdivision three of
    35  this  section  the  debtor state shall have the right to borrow money on
    36  such terms and conditions as it deems appropriate.
    37    2. The debtor state shall notify all of its  known  creditors  of  its
    38  intention to borrow under subdivision one of this section, the terms and
    39  conditions  of the borrowing, and the proposed use of the loan proceeds.
    40  Such notice shall also direct those creditors to respond  to  the  inde-
    41  pendent  monitor within thirty days as to whether they approve or disap-
    42  prove of such loan.
    43    3. Any such loan shall be approved by creditors holding at least  two-
    44  thirds  in amount of the claims of creditors responding to the independ-
    45  ent monitor within that thirty-day period.
    46    4. In order for the priority of repayment, and corresponding  subordi-
    47  nation,  under  section  two  hundred twenty-eight of this article to be
    48  effective, any such loan shall additionally  be  approved  by  creditors
    49  holding at least two-thirds in principal amount of the covered claims of
    50  the  creditors responding to the independent monitor within that thirty-
    51  day period. Claims shall be deemed to be covered if they are governed by
    52  this article or by the law of another jurisdiction that is substantially
    53  in the form of this article.
    54    § 228. Priority of repayment. 1. The debtor state  shall  repay  loans
    55  approved under section two hundred twenty-seven of this article prior to
    56  paying any other claims.

        A. 7786                             6
 
     1    2. The claims of creditors of the debtor state are subordinated to the
     2  extent  needed  to  effectuate  the priority payment under this section.
     3  Such claims are not subordinated for any other purpose.
     4    3.  The  priority  of  payment, and corresponding subordination, under
     5  this section is expressly subject to the  approval  by  creditors  under
     6  subdivision four of section two hundred twenty-seven of this article.
     7    §  229. Adjudication of disputes.  The independent monitor may request
     8  that a court of competent jurisdiction appoint a referee  or  a  special
     9  master  to make recommendations to the court regarding the resolution of
    10  any disputes arising under a section 223 claim under this article.
    11    § 230. Recoverability of section 230 claims.  Any  section  230  claim
    12  incurred prior to the date of an eligible state's application to partic-
    13  ipate  in  one or more international initiatives shall only be recovera-
    14  ble:
    15    1. to the extent that it comports with burden-sharing standards;
    16    2. provided it meets robust disclosure standards, including intercred-
    17  itor data sharing and a broad presumption in favor of public  disclosure
    18  of material terms and conditions of such claims; and
    19    3.    only  up to the proportion of the eligible claim that would have
    20  been recoverable by the  United  States  federal  government  under  the
    21  applicable international initiative if the United States federal govern-
    22  ment    had  been  the  creditor holding the eligible claim, and without
    23  regard to de minimis clauses.
    24    § 231. Application; opt in. 1.  Where this article applies,  it  shall
    25  operate  both  retroactively and prospectively and, without limiting the
    26  foregoing, shall  with  respect  to  section  223  claims  override  any
    27  contractual provisions that are inconsistent with the provisions of this
    28  article.   Notwithstanding the foregoing, the provisions of this article
    29  shall not operate retroactively as to debtor states that are not  sover-
    30  eign nations.
    31    2.  Any  creditors  of  a  debtor state whose claims are not otherwise
    32  governed by this article may contractually  opt  in  to  this  article's
    33  terms, conditions, and provisions.
    34    3.  The  terms, conditions, and provisions of this article shall apply
    35  to the debtor-creditor relationship between the debtor state and  credi-
    36  tors  opting  in  under  subdivision  two  of  this  section  as if such
    37  relationship were governed by the laws of New York state under  subdivi-
    38  sion three of section two hundred twenty-three of this article.
    39    § 232. Severability. If any  provision of this article or its applica-
    40  tion  to  any  person  or   circumstance is held invalid, the invalidity
    41  shall not affect other provisions or applications of this article  which
    42  can  be  given  effect without the invalid provision or application, and
    43  to  this end, the provisions of  this  article  are  severable.  Without
    44  limiting  the  foregoing, a debtor state's choice to have claims covered
    45  as a section 223 claim shall be valid even if its choice to have  claims
    46  covered  as  a  section  230 claim of this article would be invalid, and
    47  vice versa.
    48    § 3. This act shall take effect immediately.
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