The cash-strapped island of Puerto Rico was hit with several lawsuits yesterday just hours after a stay on litigation expired as the commonwealth failed to reach a restructuring agreement with its bondholders on its massive debt load, CNBC reported yesterday. In a suit filed by Ambac, one of the largest insurers of debt issued by Puerto Rico, the company argued that "the Commonwealth, egged on by the Oversight Board, continues to flagrantly disregard the rule of law" and said the company is seeking a declaratory judgment that the commonwealth's fiscal plan is unconstitutional and illegal. Ambac is also seeking to block Puerto Rico from officially launching Title III, a court-supervised bankruptcy-like restructuring process. The restructuring of Puerto Rico's roughly $70 billion in outstanding debt would be the largest in the history of the U.S. municipal bond market. The lawsuits filed yesterday could be the tipping point for the government of Puerto Rico and its seven-member oversight board — which was also put in place by PROMESA and tasked with overseeing the daunting challenge of restructuring the island's debt — to officially push the island into a Title III proceeding, which could force creditors to accept unfavorable repayment terms. However, in a statement released late Monday evening, Puerto Rico's fiscal agency signaled that despite the stay expiring, it wasn't going to rush into Title III.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
