Puerto Rico is trying to revive a law allowing its public agencies and utilities to restructure their mounting debt as Detroit and other U.S. cities have done, Bloomberg News reported yesterday. Creditors won the first fight in the case by persuading a federal judge in San Juan to throw out bankruptcy protections similar to those allotted municipal entities in the 50 U.S. states. Puerto Rico today is asking the U.S. Court of Appeals in Boston to reverse that ruling as the commonwealth struggles with $73 billion in debt. By blocking enforcement of the restructuring law, the lower court relegated Puerto Rico “to an anomalous legislative no man’s land,” lawyers for Governor Alejandro Garcia Padilla and Secretary of Justice Cesar R. Miranda Rodriguez said in a court filing. “If Congress had intended to leave utilities, and the people they serve, at the mercy of their creditors, it surely could and would have so indicated.” Franklin Resources Inc. and OppenheimerFunds Inc. investment funds and BlueMountain Capital Management LLC won a ruling in February from the judge in San Juan that the local restructuring law was in “irreconcilable conflict” with federal statutes. The firms, which at one time held about $2 billion in bonds issued by the Puerto Rico Electric Power Authority, alleged that the new law might force them to accept unfavorable restructuring terms if the heavily indebted utility sought to use it.
