Momentum is building toward a deal that would make painful losses inevitable for investors holding about $20 billion in bonds issued by Puerto Rico's highway, water and electricity authorities, even as some big U.S. mutual funds launch a legal battle to squelch a new law that authorizes a restructuring, Reuters reported today.
Puerto Rico in Distress
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The U.S. commonwealth of Puerto Rico asked a federal court to dismiss as premature a lawsuit filed by U.S. mutual funds that sought to strike down a recently enacted Puerto Rican law that the funds said posed a threat to American investors, Reuters reported yesterday.
The Puerto Rico Electric Power Authority may miss a January interest payment to investors, according to Municipal Market Advisors, potentially triggering the largest restructuring ever of state and local debt, Bloomberg News reported yesterday. The agency, called Prepa, used $41.6 million of reserve funds to help make a $417.6 million payment to bondholders on July 1.
Puerto Rico’s non-voting representative in the U.S. Congress is exploring changes to federal law that would allow the commonwealth’s municipal agencies to file for bankruptcy to restructure their debts, Bloomberg News reported yesterday. Pedro Pierluisi, whose formal title is resident commissioner, will ask congressional leaders about introducing a bill that would alter the U.S.