STATE OF NEW YORK
________________________________________________________________________
7562
2021-2022 Regular Sessions
IN ASSEMBLY
May 13, 2021
___________
Introduced by M. of A. DAVILA, J. D. RIVERA -- read once and referred 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. Auditing process.
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 reduce:
18 1. the social costs of sovereign and subnational debt crises;
19 2. systemic risk to the financial system;
20 3. creditor uncertainty; and
21 4. the need for sovereign and subnational debt bailouts, which are
22 costly and create moral hazard.
23 § 301. Definitions. For purposes of this article:
24 1. "creditor" means a person or entity that has a claim against a
25 state;
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD09859-02-1
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1 2. "claim" means a payment claim against a state for monies borrowed
2 or for the state's guarantee of, or other contingent obligation on,
3 monies borrowed; the term "monies borrowed" shall include the following,
4 whether or not it represents the borrowing of money: monies owing under
5 bonds; debentures; notes, or similar instruments; monies owing for the
6 deferred purchase price of property or services, other than trade
7 accounts payable arising in the ordinary course of business; monies
8 owing on capitalized lease obligations; monies owing on or with respect
9 to letters of credit, bankers' acceptances, or other extensions of cred-
10 it; and monies owing on money market instruments or instruments used to
11 finance trade;
12 3. "comprehensive audit" means a supervisory action taken to examine
13 and evaluate the public debt contracting, refinancing, or negotiation
14 process, in order to determine the lawfulness, transparency, quality,
15 efficacy, efficiency, and sustainability thereof;
16 4. "plan" means a debt restructuring plan contemplated by section
17 three hundred five of this article;
18 5. "state" means a sovereign nation; or unincorporated territory; or
19 any subnational unit thereof, excluding any municipality whose adjust-
20 ment or debts is governed by 11 U.S.C. 9; and
21 6. "supervisory authority" means an independent body referred by the
22 New York state senate finance committee.
23 § 302. Petition for relief; recognition. 1. A state may invoke appli-
24 cation of this article by filing a voluntary petition for relief with
25 the supervisory authority.
26 2. Such petition shall certify that the state:
27 (a) seeks relief under this article, and has not previously sought
28 relief under this article, or under any other law that is substantially
29 in the form of this article, during the past ten years;
30 (b) needs relief under this article to restructure claims that, absent
31 such relief, would constitute unsustainable debt of the state;
32 (c) agrees to restructure those claims in accordance with this arti-
33 cle;
34 (d) agrees to all other terms, conditions and provisions of this arti-
35 cle; and
36 (e) has duly enacted any national or subnational law needed to effec-
37 tuate these agreements. If requested by the supervisory authority, such
38 petition shall also attach documents and legal opinions evidencing
39 compliance with this paragraph.
40 3. Immediately after such a petition for relief has been filed, and so
41 long as such filing has not been dismissed by the supervisory authority
42 for lack of good faith, the terms, conditions, and provisions of this
43 article shall:
44 (a) apply to the debtor-creditor relationship between the state and
45 its creditors to the extent such relationship is governed by the law of
46 this jurisdiction;
47 (b) apply to the debtor-creditor relationship between the state and
48 its creditors to the extent such relationship is governed by the law of
49 another jurisdiction that has enacted law substantially in the form of
50 this article; and
51 (c) be recognized in, and by, all other jurisdictions that have
52 enacted law substantially in the form of this article.
53 § 303. Notification of creditors. 1. Within thirty days after filing
54 its petition for relief, the state shall notify all of its known credi-
55 tors of its intention to negotiate a plan under this article.
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1 2. The supervisory authority shall prepare and maintain a current list
2 of creditors of the state and verify claims for the purposes of super-
3 vising voting under this article.
4 § 304. Auditing process. 1. A comprehensive audit shall be conducted.
5 2. The supervisory authority shall choose an independent body to
6 conduct such comprehensive audit.
7 3. The costs associated with a comprehensive audit shall be borne by
8 the state.
9 4. The audit process shall abide by the general principles related to
10 the International Standards of Supreme Audit Institutions 100 issued by
11 the International Organization of Supreme Audit Institutions.
12 § 305. Submission, contents and voting on plan. 1. The state may
13 submit a plan to its creditors at any time, and may submit alternative
14 plans from time to time.
15 2. No other person or entity may submit a plan on behalf of the state.
16 3. A plan shall:
17 (a) designate classes of claims in accordance with subdivision six of
18 this section;
19 (b) specify the proposed treatment of each class of claims;
20 (c) provide the same treatment for each claim of a particular class,
21 unless the holder of a claim agrees to a less favorable treatment;
22 (d) disclose any claims not included in the plan's classes of claims;
23 (e) provide adequate means for the plan's implementation including,
24 with respect to any claims, curing or waiving any defaults or changing
25 the maturity dates, principal amount, interest rate, or other terms or
26 canceling or modifying any liens or encumbrances; and
27 (f) certify that, if the plan becomes effective and binding on the
28 state and its creditors under subdivision four of this section, the
29 state's debt will become sustainable.
30 4. A plan shall become effective and binding on the state and its
31 creditors when it has been submitted by the state and agreed to by each
32 class of such creditors' claims designated in the plan under subdivision
33 three of this section. Thereupon, the state shall be discharged from all
34 claims included in those classes of claims, except as provided in the
35 plan.
36 5. A class of claims has agreed to a plan if creditors holding at
37 least two-thirds in amount and more than one-half in number of the
38 claims of such class voting on such plan agree to the plan.
39 6. Each class of claims shall consist of claims against the state that
40 are equal in priority, provided that:
41 (a) equal claims need not all be included in the same class;
42 (b) claims of governmental or multi-governmental entities each shall
43 be classed separately; and
44 (c) claims that are governed by this article or the law of another
45 jurisdiction that is substantially in the form of this article shall not
46 be classed with other claims.
47 § 306. Financing the restructuring. 1. Subject to subdivision three of
48 this section the state shall have the right to borrow money on such
49 terms and conditions as it deems appropriate.
50 2. The state shall notify all of its known creditors of its intention
51 to borrow under subdivision one of this section, the terms and condi-
52 tions of the borrowing, and the proposed use of the loan proceeds. Such
53 notice shall also direct those creditors to respond to the supervisory
54 authority within thirty days as to whether they approve or disapprove of
55 such loan.
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1 3. Any such loan shall be approved by creditors holding at least two-
2 thirds in amount of the claims of creditors responding to the superviso-
3 ry authority within that thirty-day period.
4 4. In order for the priority of repayment, and corresponding subordi-
5 nation, under section three hundred seven of this article to be effec-
6 tive, any such loan shall additionally be approved by creditors holding
7 at least two-thirds in principal amount of the covered claims of the
8 creditors responding to the supervisory authority within that thirty-day
9 period. Claims shall be deemed to be covered if they are governed by
10 this article or by the law of another jurisdiction that is substantially
11 in the form of this article.
12 § 307. Priority of repayment. 1. The state shall repay loans approved
13 under this article prior to paying any other claims.
14 2. The claims of creditors of the state are subordinated to the extent
15 needed to effectuate the priority payment under this section. Such
16 claims are not subordinated for any other purpose.
17 3. The priority of payment, and corresponding subordination, under
18 this section is expressly subject to the approval by creditors under
19 subdivision four of section three hundred six of this article.
20 § 308. Adjudication of disputes. A court of competent jurisdiction may
21 appoint a referee or a special master to make recommendations to the
22 court regarding the resolution of any disputes arising under this arti-
23 cle.
24 § 309. Application; opt in. 1. This article applies where, by contract
25 or otherwise,
26 (a) the law of New York state governs the debtor-creditor relationship
27 between a state and its creditors; and
28 (b) the application of this article is invoked in accordance with
29 section three hundred two of this article.
30 2. Where this article applies, it shall operate retroactively and,
31 without limiting the foregoing, shall override any contractual
32 provisions that are inconsistent with the provisions of this article.
33 3. Any creditors of the state whose claims are not otherwise governed
34 by this article may contractually opt in to this article's terms, condi-
35 tions, and provisions.
36 4. The terms, conditions, and provisions of this article shall apply
37 to the debtor-creditor relationship between the state and creditors
38 opting in under subdivision one of this section as if such relationship
39 were governed by the laws of New York state under subdivision three of
40 section three hundred two of this article.
41 § 2. This act shall take effect immediately.
