Puerto Rico seeks bankruptcy protection: governor

A legal stay protecting Puerto Rico from lawsuits expired Monday night without standstill agreements with creditors in place.

Rossello said he is requesting that the island's financial oversight board initiate a Title III, a day after several major creditors sued his government over defaults on the island's $70 billion in bonds.

Almost half of Puerto Rico's residents live below the federal poverty level.

The financial crisis that has caused Puerto Rico's current problems has been decades in the making - and much of it is attributable to seven decades of USA policy that gave with one hand while taking away with the other.

"Make no mistake: The board has chosen to turn Puerto Rico into the next Argentina", says Andrew Rosenberg, a lawyer at Paul, Weiss, Rifkind, Wharton and Garrison, who is advising some of Puerto Rico's bondholders. Puerto Rico now owes its creditors a whopping $70 billion, far higher than Detroit's $18 billion bankruptcy in 2013.

One building contractor who was owed more than $1 million received two payments from the Government Development Bank for a total of $164,030 - only to see them bounce. Even with a bailout, there's no guarantee that the government would implement reforms to get the island back on its feet. This led to an influx of investment dollars to Puerto Rican bonds.

Under PROMESA, Congress imposed an oversight board charged with fixing Puerto Rico's finances and devising an economic recovery plan.

The decision to opt for Title III was also backed by Rossellos predecessor, Alejandro Garcia Padilla, and Rep. Luis Gutierrez, a Democrat from IL.

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Puerto Rico's debt has been growing over the last few years and now stands at $70 billion.

There are multiple reasons for Puerto Rico's troubles, analysts, officials and residents say, including decades of poor fiscal management and the failure to build the tourism industry to its full potential.

A separate bondholder group, the Cofina Seniors Coalition, had a different take on the Title III decision, calling it "sound public policy" that respects congressional intent and supports an orderly debt restructuring process.

"At least essential services would be guaranteed", he said. After years of wrangling with creditors, the island protectorate will now likely be facing even more years in court as the largest USA government entity is in federal bankruptcy court.

"Puerto Rico is no longer shielded from creditors rushing to the courthouse to lay claim to its assets - that includes the beaches, pieces of art, historical furniture and any assets whether they are nailed down or not".

This is probably not an option for Puerto Rico. "The governor and the board have a moral imperative to act immediately".

Nobody should assume that a Puerto Rico-type restructuring could be applied to U.S. states: Territories and states are distinct under the U.S. Constitution, and the Tenth Amendment limits the federal government's ability to legislate for the states, according to lawyers and legal scholars.

It is the biggest restructuring ever by a local government, far larger than Detroit's.

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