Darren Soto glad Puerto Rico will seek Bankruptcy-like measure under PROMESA

People protest looming austerity measures amid an economic crisis and demand an audit on the island's debt to identify those responsible during the May Day march in San Juan Puerto Rico Monday

Eventually, a bankruptcy judge will decide how much they will lose, which may have a ripple effect in the municipal bond market. With a state spending plan of $28.62 billion for 2016-17, the Controller's latest estimate predicts revenues down by about $413 million this fiscal year, down another $597 million in 2018, and down another $865 million in 2019. In 1942, the Franklin Roosevelt Administration instituted "Operation Bootstrap", with the goal of transitioning Puerto Rico's largely agrarian economy - seen at the time as unsustainable - into an industrial one. That's more than four times the debt Detroit collapsed under.

Puerto Rico has been negotiating with creditors, mostly investors who bought distressed Puerto Rican bonds at a discount in the hope of making a profit by demanding full payment or something close to it. Island officials have been working with a federal control board set up under the restructuring law adopted a year ago.

Puerto Rico's decision to invoke Title III under PROMESA and initiate a court proceeding to restructure its debt marks a positive step for bondholders overall.

While the Caribbean Island and MoTown share comparable histories of economic malaise, ballooning debt and fiscal mismanagement at the heart of their distress, several important differences distinguish the two proceedings. It would give Puerto Rico the legal ability to impose drastic discounts on creditor recoveries, but could also spook investors and prolong the island's lack of access to debt markets.

Bankruptcy may not immediately change the day-to-day lives of Puerto Rico's people, 45 percent of whom live in poverty, but it may lead to future cuts in pensions and worker benefits, and possibly a reduction in health and education services.

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It set up a bankruptcy-like process tailor-made for Puerto Rico. By comparison, the US city of Detroit had less than $20 billion in debts when it filed for bankruptcy in 2013, which was the biggest USA municipal bankruptcy ever.

It is too early to say what kind of impact a debt restructuring in court will have on the 3.4 million people that remain on the island, economist Jose Joaquin Villamil told The Associated Press. "There were 18 government agencies who were issuers with different securities, different collateral, with bondholders having interests against each other", he said.

Rossello's petition was approved quickly by a federal board and now moves to the Supreme Court to designate a bankruptcy judge to handle the case, explained NYT. Sanchez disputed that opinion, saying that a court-supervised restructuring would actually provide more comfort to investors.

PUERTO RICAN workers and students walked out on Monday in a general strike over cuts imposed in response to the United States colony's debt crisis. The previous governor announced that the $70 billion debt load was unpayable and needed restructuring. The island's population has declined by 350,000 in the past 10 years. "We can not keep stretching this chewing gum further".

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