The debt restructuring petition was filed by Puerto Rico’s financial oversight board in the US District Court in Puerto Rico on Wednesday under Title III of PROMESA. Title III provides a court debt restructuring process akin to US bankruptcy protection. Puerto Rico is barred from a traditional municipal bankruptcy protection under Chapter 9 of the Bankruptcy Code. The action sent Puerto Rico, whose approximately $123 billion in debt and pension obligations far exceeds the $18 billion bankruptcy filed by Detroit in 2013, into uncharted ground. Enacted only last summer the Puerto Rico Oversight, Management, and Economic Stability Act or PROMESA, Pub. L. No. 114-187 was designed help insolvent territories like the Commonwealth restructure its billions in debt and pension obligations. Next step, Chief Justice Roberts will appoint a life-tenured judge to hear the case.
CRS produced this backgrounder on PROMESA. See also Melissa Jacoby’s Presiding Over Municipal Bankruptcies: Then, Now, and Puerto Rico, 91 American Bankruptcy Law Journal __, 2017 Forthcoming, Why Puerto Rico Will Likely Rely On PROMESA Title III, Law360, March 1, 2017 and Issues To Expect In A Title III Puerto Rico Restructuring, Law360, March 8, 2017. — Joe