Puerto Rico announces historic debt restructuring in court

Puerto Rico announces historic debt restructuring in court

Puerto Rico announces historic debt restructuring in court

"After extensive discussions in good faith and the opening of the financial books of the Government of Puerto Rico to the creditors, there has not been sufficient progress in the negotiations", the USA territory's governor, Ricardo Rossello, said in a statement.

Another lawsuit filed by Ambac Assurance Corp. accuses the government of illegally retaining $300 million owed to bondholders.

Almost half of the people of Puerto Rico live in poverty while child poverty soars at 60 percent.

Nobody should assume that a Puerto Rico-type restructuring could be applied to U.S. states: Territories and states are distinct under the U.S. Constitution, and the Tenth Amendment limits the federal government's ability to legislate for the states, according to lawyers and legal scholars.

Mr. Rosselló appeared to be referring to the extraordinary power Puerto Rico will now have in court to unilaterally impose big losses on creditors.

The lawsuits, filed just hours after the expiration of a freeze on creditor litigation, include complaints from holders of Puerto Rican sales-tax-backed debt, from general obligation bondholders and from bond insurer Ambac Assurance Corp. The group said it is seeking in part to recuperate more than $240 million worth of interest owed, plus interest.

More than 2,000 investors have already filed claims based on representations from the island broker-dealers that the bonds were safe.

The prices of Puerto Rico's major bonds were little changed after the announcement.

On Wednesday, the island's authorities resorted to the so-called Title III provision of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa), which was signed in June 2016 by then-President Barack Obama.

Puerto Rico's situation is ugly.

Under the PROMESA bill, the oversight board and the Title III process were created.

"At least essential services would be guaranteed", he said.

Puerto Rico has been negotiating with creditors, mostly investors who bought distressed Puerto Rican bonds at a discount in the hope of making a profit by demanding full payment or something close to it. Island officials have been working with a federal control board set up under the restructuring law adopted a year ago.

Under it, Puerto Rico has the option to negotiate with creditors outside the court system, or through it in a process equivalent to Chapter 9.

As businesses and people say goodbye to Puerto Rico, there's even less money to pay back creditors.

Rep. Nydia Velázquez, D-N.Y., who was born and raised in Puerto Rico, said that thanks to the law, the territory has the tools it needs to climb out of its crisis. But numerous agencies that have issued government debt in Puerto Rico missed payments, putting them in default.

Detroit's case occurred under Chapter 9 of the U.S. Bankruptcy Code, which is reserved for state and local governments. In addition to its debt, Puerto Rico is facing a 45 percent poverty rate, a shrinking population and unemployment more than twice the US average.

He also noted that that the government has to walk a fine line with bondholders amid negotiations.

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