The federal board installed to supervise Puerto Rico’s debt restructuring met last week with major creditor groups, some of which are sizing up whether the island’s government needs an immediate infusion of liquidity, and if so, how much, these people said.
Hedge funds holding senior bonds backed by sales-tax revenues, called Cofinas, have offered roughly $800 million in emergency financing to alleviate a potential cash crunch, these people said.
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Congress passed a rescue law for Puerto Rico last summer to install the board and establish two debt-restructuring mechanisms, one of which allows for consensual settlements with creditors. If negotiations fail, Puerto Rico can petition a court to initiate a quasi-bankruptcy process known as Title III and potentially force creditors to accept unfavorable repayment terms.
Let’s hope Puerto Rico avoids bankruptcy.