The Commonwealth of Puerto Rico is seeking the largest municipal bankruptcy filing in US history, after failed negotiations with creditors over its $70 billion debt crisis. That\u2019s more than four times the debt Detroit collapsed under.<\/p>\n
On Wednesday, the Financial Oversight and Management Board for Puerto Rico announced<\/a> they had moved to place the US territory into federal bankruptcy court, making it the largest entity of the US government to seek refuge from creditors in the courts in history.<\/p>\n Chairman of the Oversight Board Jos\u00e9 Carri\u00f3n said the filing was made to \u201cprovide a method for the Commonwealth and its instrumentalities to achieve fiscal responsibility and access to the capital markets,<\/em>\u201d according to a press release.<\/p>\n<\/div>\n US territories are barred from filing for a traditional bankruptcy like most US cities or states. Last year, Congress approved the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) to address the impending financial crisis Puerto Rico was already facing.<\/p>\n Under the PROMESA bill, the oversight board and the Title III process were created. Title III, which is similar to the Chapter 9 bankruptcy, allows Puerto Rico and other US territories to restructure their debt under the supervision of a federal judge.<\/p>\n The announcement came a day after major creditors sued Puerto Rico over defaults to its bonds. The Commonwealth held several meetings with creditor representatives to come to an agreement. However, on Monday at midnight, a temporary court stay that protected Puerto Rico from lawsuits expired and negotiations were ended.<\/p>\n \u201cWe have sustained our position to negotiate in good faith, but before the current scenario, we choose to protect our people,<\/em>\u201d Puerto Rico Governor Ricardo Rossello said in a tweet Wednesday.<\/p>\n <\/p>\n We have sustained our position to negotiate in good faith, but before the current scenario, we choose to protect our people. pic.twitter.com\/3WBAFpXKao<\/a><\/p>\n \u2014 Ricardo Rossello (@ricardorossello) May 3, 2017<\/a><\/p><\/blockquote>\n <\/p>\n<\/div>\n Rossello sent a letter<\/a> to the Financial Oversight and Management Board on Tuesday, saying he hopes the Title III proceedings will \u201caccelerate the negotiation process, leading to as much creditor consensus where possible and achieving where necessary a prompt and efficient judicial resolution of any issues or disputes.<\/em>\u201d<\/p>\n Ted Hampton, an analyst at Moody\u2019s Investor Service, says the bankruptcy process is a \u201cpositive step.<\/em>\u201d<\/p>\n “Although a court proceeding will take considerable time and likely involve losses for all Puerto Rico bondholders, it will be an orderly process,<\/em>” Hampton says.<\/p>\n On Wednesday, the oversight board declared the Commonwealth was \u201cunable to provide its citizens with effective services,<\/em>\u201d according to court filings<\/a> obtained by The Deal.<\/p>\n That document shows Puerto Rico\u2019s 10-year recession has led them to declare a \u201cfiscal and socioeconomic crisis without precedent<\/em>\u201d in its history. Since 2007, the Commonwealth said it has seen a 14 percent decline in gross national product, a 23 percent decrease in employed persons and a 10 percent drop in population.<\/p>\n\n