Puerto Rico files for bankruptcy protection
"Given the deficit that we have inherited, it is my responsibility to guarantee the best interests of the Puerto Rican people," Gov. Ricardo Rosselló announced.
The case isn't formally called bankruptcy because Puerto Rico is barred from using Chapter 9, which is usually used by local governments seeking protection.
Instead, Puerto Rico will petition a judge for relief under a new federal law for insolvent territorial governments, called Promesa. It's a legal mechanism created by Congress to restructure debts if negotiations fail.
The largest municipal bankruptcy was roughly $18 billion owed by the city of Detroit in 2013.
In the court-supervised proceeding known as Title III, Puerto Rico will face off against hedge funds, mutual funds and bond insurers.
A legal stay that protected Puerto Rico from lawsuits expired Monday night. Hedge funds holding general obligation and sales-tax bonds sued Tuesday, naming the governor as a defendant.
Rosselló was elected governor on Nov. 8, pledging to repay the territory's debts, shrink the government and strengthen ties with the United States. ■