Puerto Rico Files for Bankruptcy the Day After Trump Admin Brags About Blocking Funds
"They wanted a bailout. We wouldn't give it to them."
AJ VICENS MAY 3, 2017 4:24 PM
After a day of sometimes violent demonstrations in San Juan protesting austerity measures and government handling of the debt crisis, Puerto Rico Gov. Ricardo Rosselló, announced Wednesday morning that he would move the island's crushing debts into the bankruptcy-like process created under federal legislation to deal with the crisis. Unlike public entities and cities in the states, Puerto Rico, essentially a colony of the United States, is prohibited from filing for bankruptcy under federal law. This legislation created a different option that allows a federal court to restructure more than $70 billion—the largest such restructuring in the history of the US municipal bond market.
The announcement comes after a flurry of lawsuits filed against the island's government by creditors Tuesday morning, the first to land after local officials' proposal for partial repayment of the debt was rejected by lenders last weekend. Under legislation passed last summer, known as the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), the island had until May 1 to negotiate a plan to address the debts while also providing basic services for the island's 3.5 million residents. The deal from the local government last Friday offered as much as 77 cents on the dollar to some lenders while offering 58 cents on the dollar to others, according to Bloomberg, but the lenders called the deal unworkable. Hedge funds such as Aurelius Capital Management, Monarch Alternative Capital, and Ambac Financial Group Inc., an insurer that owned Puerto Rican bonds, had been prevented from filing suit until May 1 under PROMESA.
The suits came a day after thousands took the streets in a national strike throughout Puerto Rico protesting cuts proposed by the board that was created under PROMESA, which increased water rates, while cutting funds to schools, public-sector jobs and pensions, health care spending, and the island's university system totaling roughly $450 million over three years. After a day of largely peaceful protests, police used tear gas and pepper spray to disperse some protesters, according to local reports, and at least 17 people were arrested. Students and other protesters have demanded an independent audit of the debt, among other things, as the island grapples with the issue.
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http://www.motherjones.com/politics/2017/05/thousands-protest-puerto-rico-debt-cuts