Puerto Rico will face investors for the first time in a bankruptcy court, as it kicks off the biggest and most divisive debt restructuring in U.S. public finance history, Reuters reported today. While today’s hearing, in federal court in San Juan, is only the start of a process that could take months or years, it is also a culmination of more than two years of bitter debate among Puerto Rico's government, its creditors and federal lawmakers over how the island should rework its debt load of $70 billion. The bankruptcy process will cover about half of Puerto Rico's debt, though other local public agencies are restructuring out of court, and some could enter bankruptcy later. The bankruptcies will also address $50 billion in underfunded pension liabilities, as Puerto Rico battles a historic crisis marked by a 45 percent poverty rate and near-insolvent public health and retirement systems. The hearing will open with a discussion on the expected timetable for a debt-cutting plan, as well as settlement talks and possible mediation, according to an agenda filed on Tuesday. That may give insight into the style and pacing of U.S. District Judge Laura Taylor Swain. The rest of the agenda, though procedural, could shed light on how aggressive Puerto Rico's creditors will be in pursuing a scorched-earth strategy to thwart debt-cutting efforts.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
