| Title | Puerto Rico Files for Biggest Ever U.S. Local Government Bankruptcy | |
| Date | Sunday May 07 2017, @04:45AM | |
| Author | n1 | |
| Topic | ||
| from the my-2c dept. | ||
Puerto Rico announced a historic restructuring of its public debt on Wednesday, touching off what may be the biggest bankruptcy ever in the $3.8 trillion U.S. municipal bond market.
While it was not immediately clear just how much of Puerto Rico's $70 billion of debt would be included in the bankruptcy filing, the case is sure to dwarf Detroit's insolvency in 2013. The move comes a day after several major creditors sued Puerto Rico over defaults its bonds.
Bankruptcy may not immediately change the day-to-day lives of Puerto Rico's people, 45 percent of whom live in poverty, but it may lead to future cuts in pensions and worker benefits, and possibly a reduction in health and education services. The island's economy has been in recession for nearly 10 years, with an unemployment rate of about 11.0 percent, and the population has fallen by about 10 percent in the past decade.
The bankruptcy process will also give Puerto Rico the legal ability to impose drastic discounts on creditor recoveries, but could also spook investors and prolong the island's lack of access to debt markets.
The debt restructuring petition was filed by Puerto Rico's financial oversight board in the U.S. District Court in Puerto Rico on Wednesday, and was made under Title III of last year's U.S. Congressional rescue law known as PROMESA.
The Title III provision allows for a court debt restructuring process akin to U.S. bankruptcy protection. Puerto Rico is barred from a traditional municipal bankruptcy protection under Chapter 9 of the U.S. code.
The filing includes only Puerto Rico's central government, which owes some $18 billion in debt backed by the island's constitution. On paper, it does not include $17 billion of sales tax-backed debt, known as COFINA debt, or debt from other agencies.
But those debts are likely to be pulled into the bankruptcy, or included in separate bankruptcy proceedings in coming days, Elias Sanchez, an adviser to Governor Ricardo Rossello, told Reuters on Wednesday. Puerto Rico's massive pension debts will also likely get restructured in the bankruptcy. "Title III was especially compelled by the commonwealth's need to restructure $49 billion of pension liabilities," the oversight board said in Wednesday's filing.
-- submitted from IRC
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printed from SoylentNews, Puerto Rico Files for Biggest Ever U.S. Local Government Bankruptcy on 2024-04-24 07:54:09