Published: Thu, May 04, 2017
Markets | By Terence Owen

Assured, MBIA sue Puerto Rico board over island fiscal plan

Assured, MBIA sue Puerto Rico board over island fiscal plan

A pair of bond insurers with about $9 billion at stake in Puerto Rico's debt crisis on Thursday sued the USA territory and its financial oversight board, objecting to a fiscal turnaround plan approved by the board in March.

Puerto Rico has announced a historic restructuring of its public debt in what might be the biggest bankruptcy ever in the United States.

"I have taken the decision to ask. that Puerto Rico be allowed to place itself under Title III protection to be able to develop a restructuring plan concerning repayment of the debt", he said. Puerto Rico, meantime, will find no easy fix for an economic crisis that has driven many thousands of its citizens to the US mainland during a decade-long recession and years of borrowing to cover budget gaps.

That included a $2 billion installment due in July. As a US territory, the island can not follow the court process used by other USA municipal governments such as Detroit.

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Rossello's decision came two days after the end of a moratorium on payments to creditors. However, on Monday at midnight, a temporary court stay that protected Puerto Rico from lawsuits expired and negotiations were ended.

Assured filed its case in the Title III proceeding, which pits Puerto Rico against a number of hedge funds, mutual funds, insurance companies and retail investors holding its $73 billion in municipal debt.

The "process can bring the debt back to sustainable levels, protect vulnerable communities and promote transparency", he added in a statement. The previous largest public bankruptcy in the U.S. was set by Detroit in 2013 when it declared a total of $18 billion of bond debt and retirement obligations.

Puerto Rico has been able to sell huge amounts of debt due to its tax-free status in the USA municipal bonds market, making its debt more valuable than other city bonds.

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