The governor of Puerto Rico announced on Wednesday, May 3 that the territory would attempt to restructure its $70 billion debt after negotiations with bondholders failed.
Puerto Rico’s debt is overseen by a federal oversight board established by the 2016 PROMESA legislation designed to help the territorial government manage its ongoing financial crisis.
Governor Ricardo Rosselló said Wednesday that the oversight board agreed with his request to proceed with the restructuring process, and the island’s case was filed in US federal court.
Puerto Rico is barred from using the more-common Chapter 9 form of bankruptcy and will petition for financial relief through the PROMESA oversight board set up last year by the US Congress.
Several new lawsuits were filed by creditors on Tuesday after a temporary freeze on new litigation expired.
The debt crisis extends to Puerto Rico’s health care system, which was not covered under the Affordable Care Act passed in 2010.
The territory received a $6.4 billion grant, but that money is set to run out at the end of this year. Lack of funding would leave up to 900,000 citizens without insurance.
Last week, President Donald Trump tweeted against providing what he called a bail out for Puerto Rico.