Puerto Rico Moves Toward Record-Breaking Bankruptcy

Puerto Rico: Workers strike over mass cuts

The phasing out in 2006 of Internal Revenue Service tax incentives offered to USA companies operating on the island also hurt because firms moved elsewhere, resulting in job losses. As such, the board's appeal comes under Title III of the PROMESA law, which would give Puerto Rico the ability to legally impose discounts on creditor recoveries. The signs read in Spanish, left, "Respect our dignified coexistence or expect resistance", and "For my children, for my grandchildren, I protest".

Economist Gustavo Velez told the AP that Rossello's announcement is the best path for Puerto Rico at this point.

Camila notes that since then, Puerto Rico has been buffeted by "defaults on loan payments, budget cuts and tax hikes" - including significant austerity measures for Puerto Ricans.

"We're going to protect our people", the governor said hours after the USA territory was hit with multiple lawsuits from creditors seeking to recuperate the millions of dollars they invested in bonds issued by Puerto Rico's government, which has declared several defaults amid a 10-year recession.

Puerto Rico has filed for bankruptcy.

The U.S. -dominated island's economy has been in recession for almost an entire decade while the population has fallen by about 10 percent in the past decade.

"Think about it as a marathon", said Craig Barbarosh, a bankruptcy lawyer with the firm Katten Muchin Rosenman.

Instead, Puerto Rico will petition a judge for relief under a new federal law for insolvent territorial governments, called Promesa. The judge will ultimately decide how and which Puerto Rico assets will be distributed to bondholders. Title III of PROMESA also grants the Commonwealth certain benefits not available to a traditional Chapter 9 municipal debtor.

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It's the biggest municipal bankruptcy filing ever in the US. Title III can be resorted to when talks aimed at reaching a negotiated solution between Puerto Rico's government and its creditors have been exhausted.

Analysts and experts agreed the case is likely to take time.

"It's going to be uncomfortable for some", Barbarosh said. Bondholders wanted higher payments and steeper cuts.

It was the first time in history that a USA state or territory had taken such an extraordinary action.

A spokeswoman for Gov. Ricardo Rossello said there would be no immediate comment other than a statement issued late Monday in which the administration said it was pursuing consensual agreements but that other options are on the table. "With that bankruptcy now started, the Governor has forfeited all power over the restructuring, and the economy of Puerto Rico will be put on hold for years".

By contrast, Puerto Rico is struggling with a public debt burden totaling $74 billion of outstanding bonds and $49 billion owed for pensions. 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. By comparison, the US city of Detroit had less than $20 billion in debts when it filed for bankruptcy in 2013, which was the biggest USA municipal bankruptcy ever. But the circumstances now being faced by the island is serving as a warning sign to other U.S. territories, more pointedly the U.S. Virgin Islands, as well as states and municipalities like IL and Philadelphia facing similar situations - rising pension costs, and continuous downgrades from rating firms that make it more expensive to borrow money.

Be Civil - It's OK to have a difference in opinion but there's no need to be a jerk. "It seems that we're back where we used to be".

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