Published: Tue, May 09, 2017
Finance | By Laverne Griffith

Ravaged by Vulture Funds, Puerto Rico Files for Biggest-Ever US Bankruptcy

Ravaged by Vulture Funds, Puerto Rico Files for Biggest-Ever US Bankruptcy

The Island, according to NYT, roughly $120 billion of bond debt, and unfunded pension obligations to restructure, which are weighing down the nation. Even with a bailout, there's no guarantee that the government would implement reforms to get the island back on its feet.

FILE - In this October 29, 2016, file photo, Ricardo Rossello, then the Puerto Rican gubernatorial candidate, speaks during a forum, in San Juan, Puerto Rico. "We are here to address the problems of Puerto Rico, not to look at the past, and I am convinced that our island will be able to resume the path of economic development with the correct steps of the government and the commitment of each one of its residents". Bondholders can not challenge Rossello's decision until 120 days from now.

Puerto Rico owes $73 billion in debt, which it can't pay.

Another concern is Puerto Rico's Medicaid program.

Title III can be resorted to when talks aimed at reaching a negotiated solution between Puerto Ricos government and its creditors have been exhausted.

"At least essential services would be guaranteed", he said.

A group representing some of those holding the $16 billion worth of general obligation bonds accused the board of sabotaging consensual negotiations and forcing Puerto Rico into bankruptcy.

Rossello said a federal control board overseeing the island's finances agreed with his request to put certain debts before a federal bankruptcy court.

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The process that Puerto Rico has undertaken is a prelude to bankruptcy, but in this case it is tailored for governments.

Rep. Nydia Velázquez, D-N.Y., who was born and raised in Puerto Rico, said that thanks to the law, the territory has the tools it needs to climb out of its crisis. "The governor and the board have a moral imperative to act immediately".

The Commonwealth of Puerto Rico is seeking the largest municipal bankruptcy filing in U.S. history, after failed negotiations with creditors over its $70 billion debt crisis.

The financial problems of the Caribbean island - which has been locked in recession for more than a decade - have shaken the large market for United States municipal bonds, especially after Detroit declared bankruptcy in 2013.

Despite long-term Puerto Rico municipal bonds having already been downgraded by Moody's to junk status, Barclays, Morgan Stanley and RBC Capital Markets sold the 2014 bonds at a cost to Puerto Rico of 8.727 percent.

He also noted that that the government has to walk a fine line with bondholders amid negotiations.

"It's going to be uncomfortable for some", Barbarosh said. "Where that sweet spot is, nobody exactly knows". However, creditors rejected the proposal, which would have paid as much as 77 cents on the dollar to some creditors, and 58 cents on the dollar for sales-tax debt. Bondholders rejected the offer. With a state spending plan of $28.62 billion for 2016-17, the Controller's latest estimate predicts revenues down by about $413 million this fiscal year, down another $597 million in 2018, and down another $865 million in 2019.

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