A look at the latest twist in Puerto Rico's debt saga
A look at the move by Puerto Rico's government to seek a form of bankruptcy protection as the U.S. Caribbean island territory struggles to emerge from a prolonged debt crisis and recession.
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DID PUERTO RICO JUST FILE FOR BANKRUPTCY?
Sort of. As a U.S. territory, the island cannot follow the court process used by other U.S. municipal governments such as Detroit. Gov. Ricardo Rossello triggered a bankruptcy-like process by declaring Puerto Rico could not agree to big cuts in spending and new taxes demanded by bondholders. His move puts in the hands of federal judge the restructuring of a portion of the island's $73 billion in public debt. Puerto Rico was authorized to take this legal route under a restructuring plan adopted by Congress last year.
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WHY DID PUERTO RICO TAKE THIS STEP?
Puerto Rico has been negotiating with creditors, mostly investors who bought distressed Puerto Rican bonds at a discount in the hope of making a profit by demanding full payment or something close to it. Island officials have been working with a federal control board set up under the restructuring law adopted last year. The governor issued a 10-year spending plan that earmarked $800 million a year to pay interest and principal on bond debt, a fraction of the $35 billion due in such payments over the next 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. Bondholders wanted higher payments and steeper cuts. Negotiations broke down in recent days and creditors filed multiple lawsuits seeking to recover their money when a freeze on litigation expired this week.
Read more here: http://www.mcclatchydc.com/news/politics-government/national-politics/article148537064.html
