Puerto Rico sued by BlueMountain Capital over debt restructuring law

By Susanna Moon

Chicago, July 22 – BlueMountain Capital Management, LLC said it filed a lawsuit Tuesday against the Government of Puerto Rico that challenges a new law that allows some public corporations to avoid their debts.

Funds managed by BlueMountain Capital are holders of power revenue bonds issued by Puerto Rico Electric Power Authority, a public corporation that provides electrical power to residents and businesses in Puerto Rico.

The company said that Prepa is widely considered the most likely public corporation to seek to avoid its debts under the Puerto Rico Public Corporation Debt Enforcement and Recovery Act, which was enacted on June 28.

“The problems raised by Puerto Rico's massive debt burden are undoubtedly very serious, but tearing up contracts, disregarding federal law and abusing power to arbitrarily pick winners and losers is not the answer. The Constitution of the United States plainly forbids that approach,” lead counsel Theodore B. Olson of Gibson, Dunn & Crutcher said in the press release.

The lawsuit was filed in the U.S. District Court of Puerto Rico.

BlueMountain Capital Management is a private investment firm with offices in New York and London.

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