Puerto Rico’s plan to slash its sales-tax-backed debt relies on a tax-free exchange of old bonds for new ones. But the partial U.S. government shutdown has thrown a wrinkle in the proceedings, bondholders said in court yesterday: the Internal Revenue Service hasn’t been able to vet it in advance because of the closure, Bloomberg News reported. That led Peter Hein, a bondholder fighting the debt-adjustment plan, to ask U.S. District Court Judge Laura Taylor Swain to reject it, saying that creditors need to know how the IRS will treat the exchange for tax purposes before it takes place. Hein also claimed that the proposal, which is designed to lower the islands’ crippling government debt, is unfair because it pays Puerto Rico residents more than mainland creditors.
