Puerto Rico has officially requested to enter into a bankruptcy-like proceeding to restructure its massive debt load after talks with its creditors failed.
Puerto Rico’s governor, Ricardo Rossello, announced Wednesday that he had requested that the federally appointed oversight board trigger Title III of the Promesa Act, a court-supervised debt restructuring similar to bankruptcy, in order to guarantee the best interests of the Puerto Rican people.
The restructuring of Puerto Rico’s roughly $70 billion in outstanding debt would be the largest in the history of the U.S. municipal bond market and will set the stage for a lengthy legal battle between the island and its creditors, which include multiple hedge funds and mutual funds, as they face off in court where a federally appointed judge could force creditors to accept unfavorable repayment terms.
In a written statement issued Wednesday, Rossello said that “after extensive discussions in good faith and the opening of the financial books of the Government of Puerto Rico to the creditors, there has not been sufficient progress in the negotiations.”
“While the Government remains willing to continue to pursue good-faith dialogue and negotiations with its creditors, the recent expiration of the PROMESA stay imposed against enforcement of creditor liability claims dictates that the best course of action is for the Government to enter into Title III.”
Rossello officially notified the oversight board of his decision in a letter dated May 2.
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