Supreme Court rules Puerto Rico can’t restructure debt (emphasis added)
In a 5-2 ruling, the justices said that although the government and people of Puerto Rico should not have to wait for possible congressional action to avert a financial crisis, the Constitution does not allow them to rewrite a statute that Congress enacted in 1984.
While states can allow municipalities to seek such debt relief, the lower court said, Congress had not given Puerto Rico that right.
. . .
Puerto Rico had long been included as a state under the bankruptcy code, but Congress amended that definition in 1984 to exclude the territory.
The island has more than $72 billion in outstanding debt, with public utilities accounting for $20 billion of the total. Seeking to alleviate that burden, Puerto Rico enacted legislation in 2014 that would have provided the island’s electric and water utilities an alternative way to restructure their debts.
Investors filed a legal challenge to that measure, citing the 1984 law. The Supreme Court on Monday affirmed a lower court ruling that found the utilities cannot restructure the debt under federal bankruptcy rules.
Which means that PR’s government ought to stop spending like there is no tomorrow. But spend they will.
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