Federal officials placed Puerto Rico under bankruptcy protection, setting up a showdown with Wall Street firms owed billions of dollars in the largest-ever U.S. municipal debt restructuring and further complicating the U.S. territory’s efforts to pull itself out of a financial mess.
The federal oversight board installed by Congress invoked a quasi-bankruptcy law that puts Puerto Rico’s standoff with creditors before a federal judge in San Juan. The judge’s decision marks the start to what could be a lengthy legal fight as Wall Street watches closely to see how other indebted municipal governments may fare in confrontations with investors.
Puerto Rico and its agencies owe $73 billion to creditors, dwarfing the roughly $18 billion owed by the city of Detroit when it entered what was previously the largest municipal bankruptcy in 2013.
Next up will probably be Illinois, which owes $321 billion, but Connecticut, a far smaller state with legislators every bit as incompetant as Illinois' owes $112 billion. That's a damn good start.