Puerto Rico bankruptcy deal faces stumbling blocks

Author: John Crabb | Published: 2 Jul 2019

A deal struck between the Puerto Rico oversight board and creditors of its some $35 billion in outstanding debt will act as a placeholder while the unincorporated US territory resolves its manifold issues. Although preliminarily agreed upon, the deal hinges on external factors and requires approval by presiding Judge Laura Swain of the US District Court for the Southern District of New York.

The deal is with a large group of General Obligation (GO) bondholders that Puerto Rico issued as well as holders of certain GO-guarantee credits. The most significant holder of these is the Public Building Authority.

US bankruptcy law states that two thirds of a class of bondholders need to be able to agree to a bankruptcy deal before it can be confirmed. The oversight board has been negotiating with the bondholders to get them to vote in favour of this arrangement.

Kyle Rifkin, restructuring officer and deputy...