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Puerto Rico Governor Announces $70 Billion Debt Restructuring Plan

Singer Rene Perez, of Calle 13, front row, third from right, joins a protest against looming austerity measures amid an economic crisis during the May Day march, as protesters demand an audit to identify those responsible for the public debt, in San Juan, Puerto Rico, Monday, May 1, 2017.

He noted that unlike a regular bankruptcy on the USA mainland, a judge can not unilaterally seize any of Puerto Rico's assets without prior authorization from the federal control board.

Puerto Rico's economy has been in recession for roughly 10 years.

An appeal for court protection was expected, at least among municpal bond market participants who had been closely following Puerto Rico's failed efforts to restructure its debts.

Puerto Rico estimates it has about $800 million a year available for debt servicing, far below the $3.2 billion now required.

A maze of government-issued bonds through various taxing authorities and revenue streams complicated attempts by Puerto Rico to settle with bondholders.

Puerto Rico Chief of Staff William Villafane told The Associated Press just hours before the freeze expired that the government preferred to reach a deal with bondholders.

"(It) presents a very big risk for both parties", he said, referring to the government and to bondholders. "Without an orderly legal process, these negotiations were going to take forever". The gap between US state pension assets and benefits promised to public employees climbed to $1.1 trillion in 2015, Pew Charitable Trusts said in a report last month.

"It is my wish that the Government's Title III processes accelerate the negotiation process by bringing the greatest possible consensus", the governor said in the statement, which was in Spanish. But Bishop urged caution for now.

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"The courts can not say, 'We're going to give you the Puerto Rico coliseum, or these properties from the Land Authority", he said.

This is probably not an option for Puerto Rico. This led to an influx of investment dollars to Puerto Rican bonds.

Puerto Rico has reached one consensual settlement with creditors, a $9 billion deal covering its public electricity monopoly that Gov. Rosselló recently renegotiated to mitigate politically unpopular fee increases on residents.

It is estimated that about 45% of Puerto Ricans on the island live in poverty.

Mr. Rosselló appeared to be referring to the extraordinary power Puerto Rico will now have in court to unilaterally impose big losses on creditors.

"Puerto Rico's bankruptcy is unique in size", Williams said. "It was the long-standing absence of a legal path for restructuring its debt that contributed to this".

Detroit's finances were taken over by a financial manager who negotiated several hair cuts for city employee pensions and health care costs.The city is slowly recovering, although it's still something of an economic basket case. They are angry about the bankruptcy filing because they fear now they won't get paid back all the money they are owed.

Supplementing the Petition is a "Statement of Oversight Board In Connection with PROMESA Title III Petition" (the "Statement"). Some politicians used politically charged language to describe the plan. But Congress has not acted to extend the stay and US President Donald Trump recently expressed disdain for what he characterized as a "bailout" of Puerto Rico. "Make no mistake: The board has chosen to turn Puerto Rico into the next Argentina". He said he did not yet have details on the breakdown of those debts.

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