Fitch Ratings said yesterday that allowing Puerto Rico’s public corporations to file for chapter 9 protection would benefit holders of the agencies’ debt as well as the commonwealth, Bloomberg News reported yesterday. Pedro Pierluisi, a Democrat who represents Puerto Rico in the U.S. House, introduced a measure in July that would let the island’s agencies restructure debt in court. U.S. states and territories are currently not able to file for chapter 9 protection under the Bankruptcy Code. Puerto and its corporations have a combined debt burden of $73 billion. Lacking a bankruptcy option, Puerto Rico approved a law in June that would allow some public corporations to negotiate with bondholders, potentially forcing them to accept unfavorable terms. Fitch cut the commonwealth’s rating deeper into speculative grade after the legislation passed, and its bonds declined. Giving the chapter 9 option would allow investors to better assess potential losses, Fitch said.
