On June 28, 2014, Puerto Rico’s Gov. Alejandro Garcia Padilla signed into law the Puerto Rico Corporations Debt Enforcement & Recovery Act (the Act), which permits certain public corporations in Puerto Rico to restructure their debt obligations. Within 24 hours, mutual funds investing in Puerto Rico’s Power Revenue Bonds (the PREPA Bonds) issued by the Puerto Rico Electric Power Authority (PREPA) challenged the constitutionality of the Act, while rating agencies downgraded PREPA Bonds, sparking numerous reports of PREPA’s imminent filing.

It is uncertain whether the Act will survive the constitutional challenge or how soon the Act will be invoked by Puerto Rico’s public corporations. What is clear is that despite claiming to be modeled on the U.S. Bankruptcy Code (the Code), the Act lacks some of the key protections that creditors have come to expect when dealing with the U.S. system.

The Bond Crisis in Puerto Rico

This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.

To view this content, please continue to their sites.

Not a Lexis Subscriber?
Subscribe Now

Not a Bloomberg Law Subscriber?
Subscribe Now

Why am I seeing this?

LexisNexis® and Bloomberg Law are third party online distributors of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® and Bloomberg Law customers are able to access and use ALM's content, including content from the National Law Journal, The American Lawyer, Legaltech News, The New York Law Journal, and Corporate Counsel, as well as other sources of legal information.

For questions call 1-877-256-2472 or contact us at [email protected]