Assured, MBIA sue Puerto Rico board over island fiscal plan
- Author: Zachary Reyes May 04, 2017,
May 04, 2017, 23:39
The governor of Puerto Rico announced Wednesday that the USA territory would seek a form of bankruptcy protection to restructure its $70 billion debt, the largest municipal restructuring in US history.
Congress passed the law past year after the U.S. Supreme Court ruled that federal bankruptcy law bars Puerto Rico from restructuring the debt of its insolvent public utilities.
Puerto Rico has announced a historic restructuring of its public debt in what might be the biggest bankruptcy ever in the United States.
The board's petition under a court-supervised restructuring process known as Title III was meant to put the brakes on creditor litigation - outside of the bankruptcy-like process - seeking redress for past payment defaults.
"Title III was especially compelled by the commonwealthâ?Ts need to restructure $49 billion of pension liabilities", the oversight board said in the filing. Bondholders are certain to take a hit, with the commonwealth saying it can't pay in full.
On Wednesday, the oversight board declared the Commonwealth was "unable to provide its citizens with effective services, " according to court filings obtained by The Deal. But the case will likely greatly exceed Detroit's record insolvency of $18 billion to $20 billion in 2013.
According to the US Census Bureau, 46 percent of Puerto Rico's residents live below federal poverty levels, compared to the national average of 14 percent and 36 percent in Detroit. The population has fallen by about 10 percent in the past decade. The complaint, filed in federal court in San Juan, marks the first legal challenge to Puerto Rico's debt-cutting plan by creditors following the board's unprecedented action. The cost of fully paying off their debt would be around $3.5 billion a year.