Puerto Rico files for bankruptcy

San Juan May 4 (IANS) Puerto Rico has filed for bankruptcy and sought relief under a law enacted to help the US commonwealth restructure its massive debt load a media report said.

This could pave the way for what could be the largest-ever bankruptcy case involving a US local government entity Efe news reported.

Puerto Rico owes more than $70 billion in bond debt and has nearly $50 billion in pension liabilities as a consequence of a more than decade-long recession.

It has also suffered a massive exodus of members of its economically active population who as US citizens freely relocated to the mainland.

On Wednesday the island s authorities resorted to the so-called Title III provision of the Puerto Rico Oversight Management and Economic Stability Act (Promesa) which was signed in June 2016 by then-President Barack Obama.

Title III of that law - a hybrid between Chapter 9 and Chapter 11 bankruptcy protection designed for local governments (although Puerto Rico is excluded) and corporations respectively - provides a stay on all creditor litigation and would leave decisions on debt repayment in the hands of a court.

But it would not bring an end to talks aimed at reaching a restructuring agreement.

Title III can be resorted to when talks aimed at reaching a negotiated solution between Puerto Rico s government and its creditors have been exhausted.

In a statement Jose Carrion the chairman of the Promesa-established Fiscal Oversight Board (JSF) that filed for the bankruptcy proceedings at the request of Puerto Rican Governor Ricky Rossello s administration said the entity determined that the measure was necessary and appropriate.

He said it was the right path for protecting Puerto Rico s residents and the interests of its creditors after a moratorium protecting the Caribbean island from creditor litigation expired on Monday.

The decision to opt for Title III was also backed by Rossello s predecessor Alejandro Garcia Padilla and Luis Gutierrez a Democrat from Illinois.

The next step is for US Supreme Court Chief Justice John Roberts to choose a judge to handle the bankruptcy case.

--IANS
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