On May 3, 2017, the Financial Oversight and Management Board for Puerto Rico (the “Oversight Board”), acting on behalf of the cash-strapped Commonwealth of Puerto Rico (the “Commonwealth”), filed for bankruptcy protection in the District Court for the District of Puerto Rico. The Commonwealth’s Title III Petition for Covered Territory or Covered Instrumentality (the “Petition”) was filed in accordance with Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”), codified at 48 U.S.C. § 2161, et seq. The Petition follows unsuccessful negotiations with bondholders regarding the Commonwealth’s massive debt load that ended with a series of legal actions filed against the Commonwealth and others initiated the moment the legal stay provisions of PROMESA expired on May 1, 2017. The Commonwealth’s petition marks the first time in history that a United States territory has commenced insolvency proceedings, and the first Title III proceeding under PROMESA. Title III Adjustment of DebtsBecause the United States Bankruptcy Code does not apply to territories such as Puerto Rico, Congress enacted PROMESA to provide covered territories with methods for achieving “fiscal responsibility” and, if necessary, an avenue to pursue insolvency proceedings in the United States District Court. In crafting the framework of a Title… Read full this story
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