Puerto Rico has Filed what is Expected to be the Largest Local Government Bankruptcy in U.S. History
The U.S. territory of Puerto Rico is looking to restructure its public debt because several major creditors are suing Puerto Rico over defaults on its bonds. It is not yet known how much of Puerto Rico’s $70 billion debt will be a part of the bankruptcy filing. The filing was made by Puerto Rico’s financial oversight board in Puerto Rico at the U.S. District Court and it was made under Title III of PROMESA, which was a rescue law that was passed last year by the U.S. Congress to help Puerto Rico with its debt problems. The Huffington Post writes:
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.
Puerto Rico has been in a recession for the past 10 years, which has led to an unemployment rate of about 11 percent. Detroit’s 2013 bankruptcy covered around $18 billion, but Puerto Rico is expected to exceed that amount.
We will have to wait and find out just home much of Puerto Rico’s total public debt will be restructured and what the island plans to do to avoid more debt.
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