Insurers of Puerto Rican bonds sued the U.S. commonwealth late Thursday over its recent debt default, the first lawsuit against the island since its governor called its $70 billion debt load "unpayable" last June, Reuters reported today. The lawsuit by Assured Guaranty and Ambac Financial, filed in U.S. federal court in Puerto Rico, asks a judge to declare that Puerto Rico violated the U.S. constitution when it diverted $163 million from revenue streams meant to pay debt at the island's infrastructure, highway and other agencies. It also looks to block Puerto Rico from executing these clawbacks. The lawsuit is an opening salvo in what could be a long and expensive court fight over Puerto Rico's efforts to restructure $70 billion in debt. In June, Governor Alejandro Garcia Padilla called the island's debt load "unpayable" and sought concessions from bondholders. Last month, he said that the only way to afford to pay debt backed by Puerto Rico's constitution was to redirect or "claw back" revenues earmarked for debt at other agencies. The infrastructure authority, PRIFA, missed a $36 million debt payment on Monday as a result of the clawbacks. Read more.
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