Puerto Ricos $70 Billion Debt Sunset
Dawn is breaking over the sun-kissed commonwealth in the northeast Caribbean Sea. After years of partly embittered quarrels with hedge funds, Puerto Rico finally filed for protection from its creditors. This about $74 billion worth declaration of bankruptcy marks the latest milestone in U.S. municipal bankruptcy history. Governor’s Ricardo Rossello decision to file for reorganization and protection from creditors under the Bankruptcy Code is also the attempt to pursue a Title III proceeding and hence to press the stand-by button regards the multiple impending and ongoing civil lawsuits.
Consensual negotiations or never ending process
The exact wording of the Financial Oversight and Management Board for Puerto Rico reads like an oath of disclosure: “The commonwealth and its instrumentalities cannot satisfy their collective $74 billion debt burden and $49 billion pension burden and pay their operating expenses.” But despite this the commonwealth did not miss the opportunity to invite all creditors to participate to consensual negotiations (including through mediation) although the chance for the creditors to get back at least a fractional part of their money is rather scarce.
Several bondholders amongst which are Hedge funds including Aurelius Capital Management, Monarch Alternative Capital and Whitebox Advisors (holding about a third of Puerto Rico’s debt) expressed their disgust at the lengthy restructuring process and filed civil law suits. Governor Ricardo Rossello on his part relied rather on the reconciling power than on the polarizing effect of his (creditors’ interests excluding) decision: “We have reached this decision because it protects the best interests of the people of Puerto Rico.”
Debitos is creditor’s frist choice
While the official causes of Puerto Rico’s (which ironically translates rich harbour) bankruptcy are “lack of financial transparency, excessive borrowing, management inefficiencies and a severe economic decline” the Government of the commonwealth lacks of any official road map to creditors in order to ensure the full satisfaction of their open claims. All they know by now and for sure is that this restructuring process will require perseverance.
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