Puerto Rico has officially requested to enter into a bankruptcy-like proceeding to restructure its massive debt load after talks with its creditors failed, CNBC reported yesterday. Puerto Rico's governor, Ricardo Rosselló, announced Wednesday that he had requested that the federally appointed oversight board trigger title III of the PROMESA Act, a court-supervised debt restructuring similar to bankruptcy, in order to guarantee the best interests of the Puerto Rican people. 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 and will set the stage for a lengthy legal battle between the island and its creditors, which include multiple hedge funds and mutual funds, as they face off in court, where a federally appointed judge could force creditors to accept unfavorable repayment terms. Following the Title III announcement, the Ad Hoc Group of General Obligation bondholders, which holds approximately $3 billion of the island's debt, issued a strongly worded statement accusing the oversight board of sabotaging creditor talks in order to push Puerto Rico into bankruptcy. "A Title III filing at this point in time enables Puerto Rico to freeze numerous lawsuits, maintain essential services for its residents, and rely on a court-driven restructuring process to objectively determine respective creditors' rights," said Susheel Kirpalani of Quinn Emanuel Urquhart & Sullivan. "While it is regrettable that Puerto Rico is facing a bankruptcy-like process to resolve its historic fiscal challenges, this was certainly an option of last resort."
Click here to read Puerto Rico Governor Ricardo Rosselló’s letter to the Financial Oversight and Management Board.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
