Puerto Rico's Unprecedented Move to Ease $123B Debt
Step toward bankruptcy would dwarf Detroit's restructuring
By Rob Quinn,  Newser Staff
Posted May 4, 2017 12:39 AM CDT
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Singer Rene Perez of Calle 13 speaks to protesters from a stage during a May Day march protesting looming austerity measures amid an economic crisis and demanding an audit to identify those responsible for the island's public debt in San Juan, Puerto Rico, on Monday.   (AP Photo/Danica Coto)
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(Newser) – Puerto Rico has taken a big step toward a bankruptcy that would be unprecedented in two ways: It would be the first by an American state or territory, and it would be by far the biggest of its kind, dwarfing Detroit's $18 billion restructuring in 2013. Puerto Rico's financial oversight board filed a debt restructuring petition in federal court Wednesday, the day after several creditors sued over bond defaults, reports Reuters. The island territory has been mired in economic crisis for a decade and has seen its population shrink by a tenth over that time as residents move to the mainland US. The New York Times reports that the filing includes $74 billion in debt and $49 billion in pension obligations.

NPR describes the process Puerto Rico has entered as a "bankruptcy-like process" tailor-made for the island, with the same underlying principles as Chapter 9 protections. It's not clear how much holders of Puerto Rico government bonds will receive, the Washington Post reports, but a group representing senior bondholders described the filing as a necessary step forward. "The move enables Puerto Rico to freeze numerous lawsuits, maintain essential services for its residents, and rely on a court-driven restructuring process to objectively determine respective creditors' rights," the group said. The petition was filed under the terms of a Puerto Rico rescue bill lawmakers passed last summer.

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