Puerto Rico Eyes Options As It Faces Debt Deadline - Again
- Author: Jacqueline Ellis May 11, 2017,
May 11, 2017, 8:13
"A Title III filing at this point in time enables Puerto Rico to freeze numerous lawsuits, maintain essential services for its residents, and rely on a court-driven restructuring process to objectively determine respective creditors' rights", said Susheel Kirpalani of law firm Quinn Emanuel Urquhart & Sullivan in the statement.
The previous largest USA public bankruptcy, Detroit's in 2013, covered some $18 billion in debt.
Midnight, from Monday into Tuesday, marked the end of a freeze on creditor litigation under last year's federal rescue law known as PROMESA, created to encourage Puerto Rico and the oversight board to negotiate debt-cutting agreements with creditors.
Some of the island's debts will go before a federal bankruptcy court, making it the largest USA government entity to seek such protection from creditors.
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.
SAN JUAN, Puerto Rico (AP) Puerto Rico's governor has announced a historic restructuring of a portion of the US territory's $70B debt through courts after negotiations with bondholders failed.
"It's going to be uncomfortable for some", Barbarosh said.
The scale of the restructuring is far larger than Detroit's record-setting bankruptcy, and it's unclear how long a court proceeding would last or how deep would be the cuts that are imposed on bondholders. The island's Electric Power Authority has some $9 billion of debt, the Aqueducts and Sewer Authority has roughly $5 billion of debt and the Highways and Transportation Authority has around $7 billion of debt.
Overall, Puerto Rico is facing $73 billion in debt.
The Motor City had $18 billion of debt, including outstanding bonds and unfunded liabilities for its worker pensions and retiree healthcare, when it filed for Chapter 9 municipal bankruptcy in July 2013.
Soto's 9th District includes the largest Puerto Rican population in Central Florida, many of them who have moved to the area to find work and many more who still have family on the island.
Puerto Rico's current fiscal plan sets aside $800 million a year for debt payments, however, it is only a fraction of the $35 billion it owes in interest in payments over the next 10 years. Puerto Rico was authorized to take this legal route under a restructuring plan adopted by Congress previous year.
Some bondholders are expected to file legal challenges to Rossello's decision but can not do so for 120 days. The unprecedented maneuver, requested by the governor and filed shortly afterward by a federal oversight board, sets in motion what would likely be the largest municipal debt restructuring in US history.
It is estimated that about 45% of Puerto Ricans on the island live in poverty. The debt is a result of Puerto Rico's use of municipal bonds.
FILE - In this October 29, 2016, file photo, Ricardo Rossello, then the Puerto Rican gubernatorial candidate, speaks during a forum, in San Juan, Puerto Rico. Puerto Rico, the board decided last week, will raise water rates on consumers, liquidate its decades-old industrial development bank and seek concessions from creditors of additional government agencies.
"It is my hope that the Government's Title III proceedings will accelerate the negotiation process", Rossello said.