Puerto Rico is one step closer to figuring out what to do about its outstanding debt and addressing its decadelong recession. The U.S. territory still won’t have Chapter 9 bankruptcy protection, but this oversight bill allows the island a legal out to restructure its debt.
Bondholders are sure to be upset because they’ll likely take a haircut. Puerto Rican officials don’t like the idea of a board that would oversee the island’s finances and argue the bill doesn’t address the basic economic problems plaguing the island. The tax base is leaving, and there’s little incentive to start small businesses there.
Some Democrats have argued that pensions for retired government employees need to take precedent over bond repayment. Along with the more than $70 billion in bond debt, the island is sitting on more than $40 billion in unfunded pension liabilities.
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