Puerto Rico files petition under Promesa debt restructuring provision

By Caroline Salls

Pittsburgh, May 3 – The Commonwealth of Puerto Rico filed a petition Wednesday in the U.S. District Court for the District of Puerto Rico under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa), which is a statutory vehicle that allows Puerto Rico and other U.S. territories to restructure their debt.

“From current revenues, the commonwealth and its instrumentalities cannot satisfy their collective $74 billion debt burden and $49 billion pension burden and pay their operating expenses,” Puerto Rico said in a document filed with the court.

“Puerto Rico can no longer fully pay its debt and pay for government services. Nor can Puerto Rico refinance its debt – it no longer has access to the capital markets. In short, Puerto Rico’s crisis has reached a breaking point.”

The commonwealth said it will use the tools provided by Promesa, and with the benefit of the automatic stay imposed by the Bankruptcy Code, Puerto Rico and its oversight board will continue efforts to negotiate a comprehensive debt restructuring through a Title III plan of adjustment.

Puerto Rico said its fiscal plan includes measures that will reduce its fiscal gap by $39.6 billion and generate surplus cash flow of $7.9 billion over a 10-year period.

According to the court filing, a stay imposed by Promesa expired on May 1 without an agreement on a restructuring of the commonwealth’s debt.

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