Assured, MBIA sue Puerto Rico board over island fiscal plan

Assured, MBIA sue Puerto Rico board over island fiscal plan

Puerto Rico, meantime, will find no easy fix for an economic crisis that has driven many thousands of its citizens to the US mainland during a decade-long recession and years of borrowing to cover budget gaps. Shown here is the capitol of the US territory in San Juan.

Gov. Ricardo Rossello triggered a bankruptcy-like process by declaring Puerto Rico could not agree to big cut.

Puerto Rico acted Wednesday to seek relief from about $74 billion in debt and $49 billion in unfunded pension obligations, reports the New York Times, Politico and USA Today.

For context, when Detroit declared bankruptcy in 2013, its debt level was $18 billion.


The announcement came a day after major creditors sued Puerto Rico over defaults to its bonds.

Bankruptcy may not immediately change the day-to-day lives of Puerto Rico's population - almost half of whom live in poverty - but it could result in future cuts in pensions and worker benefits, and possibly a reduction in health and education services. Puerto Rico is barred from a traditional municipal bankruptcy protection under Chapter 9 of the US code. The population has fallen by about 10 percent in the past decade.

The suit filed by units of Assured Guaranty Ltd and MBIA Inc came a day after Puerto Rico announced a historic restructuring of its public debt, touching off what may be the biggest bankruptcy ever in the $3.8 trillion USA municipal bond market.

"An orderly process for working out Puerto Rico's debt trouble provides the best hope for Puerto Rico and also the best chance for most creditors to emerge better off", Brad Setser, senior fellow at The Council on Foreign Relations, said in a telephone interview.

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