Puerto Rico hit with 1st lawsuit from bondholders

People carry a large Puerto Rican flag as they protest looming austerity measures amid an economic crisis and demand an audit on the island's debt to identify those responsible in San Juan Puerto Rico Monday

The stay prevented the island from being sued for failing to pay its debt payments, buying Puerto Rico time to work with creditors on a restructuring plan.

The request, coming just one day after major creditors sued the Caribbean island and its Governor Ricardo Rossello over defaults on its $70 billion bonds, is similar to US bankruptcy protection.

But at the same time, some Puerto Ricans say quietly that if the court proceedings really do allow their government to cancel debt, their island may finally get the fresh start it needs. Should the bankruptcy proceed, the process would be similar to court-mediated debt restructurings common for other entities in the United States. He said he did not yet have details on the breakdown of those debts.

Mick Mulvaney, Trump's budget director, said Wednesday that the White House pushed hard to ensure no federal dollars would go toward paying the island's debts in the latest Congressional budget deal. The company said it also has been forced to pay more than $52 million in insurance claims as a result of ongoing defaults by Puerto Rico's government.

Puerto Rico has approximately $74 billion of bond debt and $48 billion of unfunded pension liabilities.

Puerto Rico's debt has been growing over the last few years and now stands at $70 billion. Bondholders can not challenge Rossello's decision until 120 days from now.

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"And Governor Rossello must either get on board or get out of the way", she said, saying she voted in favor of a rescue package previous year so Puerto Rico could restructure its debt. However, given the existing disputes over relative priority of different bonds and collateral issued by various instrumentalities of the Commonwealth, the broad-ranging opinions on the viability of the Commonwealth's Certified Fiscal Plan, and a rocky coast line of other issues, including underfunded pensions, Title III appears to be the only way for Puerto Rico to avoid a shipwreck.

"The Commonwealth's proposal is not a credible starting point for negotiations", Andrew Rosenberg of Paul, Weiss, Rifkind, Wharton and Garrison, an adviser to the Ad Hoc Group of Puerto Rico General Obligation Bondholders, said in a statement.

Supplementing the Petition is a "Statement of Oversight Board In Connection with PROMESA Title III Petition" (the "Statement"). Meanwhile, the government will continue to talk to creditors and seek a stay on the almost two dozen lawsuits that the USA territory faces.

The lawsuits are expected to be among several filed as bondholders seek to recover the money they invested in Puerto Rico government bonds. "However, given the deficit that we have inherited, it is my responsibility to guarantee the best interests of the Puerto Rican people". "They just can not do that without the consent of the board". It's unknown how long the bankruptcy-like process will take, although local government officials believe it could be resolved in four years.

"This is much bigger and much more complex than Detroit", Sanchez said, adding that he estimates the process could be completed within four years. The crisis has prompted almost 450,000 Puerto Ricans to leave the island for the US mainland in the past decade. It would also make substantial cuts to public employee benefits and raise fees for services for the 3.4 million people living on the island.

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