Creditors of Puerto Rico's sales tax authority have asked a federal court to prevent the U.S. territory from diverting the revenue that guarantees its debt to repay other investors, Reuters reported yesterday. Crippled by high poverty and nearly insolvent public health and pension systems, Puerto Rico is trying to restructure $70 billion in debt to fend off economic catastrophe. Its two largest debt classes are $18 billion in general obligation, or GO, bonds guaranteed by the island's constitution, and some $17 billion in so-called COFINA debt backed by sales tax revenue. Funds holding more than $2 billion in senior COFINA debt yesterday sought to intervene in a lawsuit filed by GO bondholders against Puerto Rico's government. That lawsuit, led by Lex Claims LLC, says COFINA funds should be redirected to GO holders under payment priority rules. In its statement, the COFINA group, which includes funds like Goldentree and Canyon Capital, called the GO bondholders' claims "meritless" and "self-serving." Read more.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.