Puerto Rico files for debt restructuring

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

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