GOP leaders scramble to rescue Puerto Rico from $72B debt

House Republican leaders scrambled Thursday to rally support for a bill that rescues Puerto Rico from $72 billion in bond debt by imposing an oversight board to audit the U.S. territory’s finances and put it on a path toward fiscal responsibility.

Yet conservatives on the House Natural Resources Committee threatened to revolt against the Republican-authored bill, saying it rewrites the conditions that creditors expected when they invested in the island.

Rep. John Fleming, Louisiana Republican who is running for Senate, even accused Republican leaders of trying to circumvent dissenting members by planning a voice vote to usher the bill through a committee markup that will begin late Wednesday and resume Thursday.

“If the bill comes before the committee as planned, I will insist on a recorded vote, and I will do my best to defeat any bailout this committee puts before us,” Mr. Fleming said.

A committee aide said Chairman Rob Bishop, Utah Republican, told members that he is open to a recorded vote and that he would assist members who want to offer amendments.

Analysts say Puerto Rico’s woes are the result of years of overborrowing and spending and the steady exit of young, working-age residents who could help turn around the island’s fortunes.

To keep itself afloat, the island is swiping money from pension funds and shifting funds dedicated to one pool of creditors to satisfy others.

House Republican leaders have been trying to strike a difficult balance between Democrats who pushed to extend new bankruptcy protections to Puerto Rico and conservatives who have said they don’t want to set precedents to protect the island from its bondholders because overextended states may follow suit.

Puerto Rico’s problems were self-made, they said, and the island will have to take responsibility for digging itself out of the morass.

“This is not going to be a bailout,” Mr. Bishop, Utah Republican, assured members at a Wednesday hearing on legislation by Rep. Sean Duffy, Wisconsin Republican, to resolve the crisis.

Speaker Paul D. Ryan endorsed the bill, saying it “holds the right people accountable for the crisis, shrinks the size of government and authorizes an independent board to help get Puerto Rico on a path to fiscal health.”

The Obama administration and congressional Democrats say the bill is a work in progress and could use improvements, even as they demanded immediate action for Puerto Rico, which is scaling back public programs and laying off hospital workers amid the crisis.

“Without an agreement, there is a collapse in Puerto Rico,” Antonio Weiss, counselor to Treasury Secretary Jack Lew testified Wednesday. “We have got to get this done.”

Mr. Weiss said the bill’s debt-restructuring process should be streamlined so that there is no gap between a stay on litigation from creditors, providing time for voluntary negotiations, and board-driven petitions to restructure debts.

Mr. Bishop’s committee has been furiously revising a first draft of the bill that upset members of both parties, including Democrats whose votes may be needed to pass the bill.

Democrats said the initial version gave “colonial” powers of the board, allowing it to overrule elected members of the assembly and governor to enact a fiscal plan.

Commissioner Pedro Pierluisi, the island’s nonvoting member, said the latest version calls for a “back and forth” between the board and Puerto Rican government, so they can deliberate until the board is satisfied.

“This is the bottom line: My constituents and I will accept this oversight, provided — let me say again, provided — we also get a meaningful debt restructuring mechanism,” Mr. Pierluisi said.

The newest version will allow the oversight board to forge ahead with debt restructuring on classes of creditors even if there are some holdouts, as long as two-thirds of creditors in each pool agree to the arrangement.

Some conservatives said the bill proposes bankruptcy by another name and that stakeholders should be focused on fixing the “socialist progressive policies” that brought the island to this point.

“This is a framework of a bankruptcy, and ultimately it will result in a bailout,” Mr. Fleming said.