Puerto Rico turns to courts for debt protection

06 May, 2017, 01:49 | Author: Evan Mason
  • A person carries a Puerto Rican national flag during a protest against the government's austerity measures as Puerto Rico faces a deadline on Monday to restructure its $70 billion debt load or open itself up to lawsuits from creditors in San Juan

Puerto Rico filed under Title III of the PROMESA law, which allows an in-court debt restructuring process akin to US bankruptcy protection.

Breitbart News reported that "vulture" capitalists who bought Puerto Rico bonds for pennies-on the-dollar were trying to court liens on the government's assets after refusing to take discounts from face value of 77 cents-on-the-dollar for their general obligation bonds, and 58 cents-on-the-dollar for "Cofina" sales-tax-backed debt, offered by Puerto Rico's Democrat Governor Ricardo Rossello.

Title III is an in-court debt restructuring process akin to US bankruptcy protection, since Puerto Rico is barred from using Chapter 9 of the USA federal bankruptcy code reserved for insolvent public entities. It would also make substantial cuts to public employee benefits and raise fees for services for the 3.4 million people living on the island. However, the judge will first need approval from the federal control board that was authorized by Congress a year ago to oversee the island's finances.

Sanchez noted that unlike a regular bankruptcy in the USA mainland, a judge can not unilaterally seize any of Puerto Rico's assets and turn them over to bondholders.

The lawsuit comes after the island's government failed to negotiate any deal with bondholders.

The decision to resolve a portion of the debt in court is the largest effort ever made by a US government to shield itself from creditors.

The governor did note, however, that negotiations for a consensual restructuring agreement wouldn't come to a halt.

He said it was the right path for protecting Puerto Ricos residents and the interests of its creditors after a moratorium protecting the Caribbean island from creditor litigation expired on Monday.

The May Day strike closed shops, while protesters blocked roads in the capital San Juan to the University of Puerto Rico and the city's global airport.

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IL is grappling with more than $129 billion of retirement debt, leaving the state with the worst credit rating in the nation.

"It's going to be uncomfortable for some", Barbarosh said.

Rosselló said at a press conference that the government had officially notified the state's Fiscal Supervision Board on Tuesday that it wished to restructure its debts under Title III of.

The new conditions call for a federal district judge to be in charge of the restructuring.

While Detroit's case was resolved in a couple of years, it is unclear how long it will take for Puerto Rico.

If that's the case, Puerto Rico's bankruptcy would be almost five times bigger than Detroit's, which set a record in 2013.

An earlier version of this article misstated the annual cost of fully servicing Puerto Rico's $73 billion in bond debt.

The island has been mired in recession for over 10 years, causing many Puerto Ricans to migrate to the 50 states. This is a debt restructuring plan that is carried out under the auspices of the court. We have a financial crisis that is suffocating the people - working class families, students, everyone." added Soto "The Island is losing a doctor everyday while fighting Zika, and facing a 12.4 percent unemployment rate, school closings and other merciless austerity measures.

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