Supreme Court to review Puerto Rico debt case

Supreme Court to review Puerto Rico debt case

Puerto Rico avoided default Dec. 1 after announcing a $355 million bond payment.

The Supreme Court will take up an appeal from Puerto Rico that seeks to restructure the commonwealth’s debt of its public utilities. ABC News reports that the justices decided Friday to review the ruling of a lower court in which Puerto Rico could not pass a law giving municipalities the ability to declare bankruptcy.

The law was passed last year by Puerto Rico lawmakers, in hope that it would help the struggling utility companies meet their debt obligations to bond holders and creditors. Puerto Rico has struggled with economic issues for over nine years and holds over $72 million in public debt.

A federal district court determined that the measure did not adhere to federal bankruptcy law. The 1st U.S. Circuit Court also found the measure to be unlawful. Puerto Rico feels that there are no federal laws that prevent them from restructuring debt.

The case will likely be heard by the courts in March, by an eight-justice court. Justice Samuel Alito will not participate in the hearing. While an explanation for his absence has not been given, the justice does own at least $15,000 in tax-free fund shares, that are invested into Puerto Rico bonds. He is involved with the case, according to his 2014 financial report.

In June, Puerto Rico Gov. Alejandro Garcia Padilla stated that Puerto Rico’s public debt was unable to be paid back, and that concessions would be sought from debtors.

Puerto Rico avoided default Dec. 1 after announcing a $355 million bond payment. Padilla told the U.S. Senate Judiciary Committee that day that Puerto Rico is running out of cash, and that future payments were unlikely. Padilla told officials that his statements were a “distress call,” in hopes that Congress would help the Puerto Rico government. The governor hopes that Congress will be able to help design a legal framework that would give the commonwealth the ability to restructure its debts.

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