Puerto Rico’s decision to file for a unique
form of bankruptcy could result in a prolonged and bitter
litigation between the island’s creditors.
The Caribbean island invoked title III of the Puerto Rico
Oversight, Management and Economic Stability Act (Promesa), its
own version of the US Bankruptcy Code’s Chapter 9,
on May 3. While it only counts 3.5 million citizens, the
territory has more than $70 billion in outstanding debt and
nearly $50 billion in unfunded pension obligation bonds. This
makes the bankruptcy the largest in US history, dwarfing the
previous holder, the US city of Detroit (with debts of $18
billion in 2013), by nearly 10 times.
Leland Goss of the International Capital Market Association
thinks that Puerto Rico is in for a long...