(Repeats story that ran earlier with no change to headline or
By Nick Brown
May 17 Puerto Rico on Wednesday will face
investors for the first time in a bankruptcy court, as it kicks
off the biggest and most divisive debt restructuring in U.S.
public finance history.
While Wednesday's hearing, in federal court in San Juan, is
only the start of a process that could take months or years, it
is also a culmination of more than two years of bitter debate
between Puerto Rico's government, its creditors and federal
lawmakers over how the island should rework its debt load of $70
The bankruptcy process will cover about half of Puerto
Rico's debt, though other local public agencies are
restructuring out of court, and some could enter bankruptcy
The bankruptcies will also address $50 billion in
underfunded pension liabilities, as Puerto Rico battles
a historic crisis marked by a 45 percent poverty rate and
near-insolvent public health and retirement systems.
Puerto Rico, home to 3.5 million U.S. citizens, has spent
the last ten years in recession with debt piling up to pay for
Earlier this month, the U.S. territory's central government
entered a modified version of bankruptcy protection created
under a federal rescue law known as PROMESA as a way to legally
pave the way to cut its debt. The island's sales tax authority,
known as COFINA, followed suit days later with its own filing
under Title III of the PROMESA law, which provides for the
The hearing will open with a discussion on the expected
timetable for a debt-cutting plan, as well as settlement talks
and possible mediation, according to an agenda filed on Tuesday.
That may give insight into the style and pacing of U.S. District
Judge Laura Taylor Swain, the Manhattan jurist tapped by the
U.S. Supreme Court to handle the cases.
The rest of the agenda, though procedural, could shed light
on how aggressive Puerto Rico's creditors will be in pursuing a
scorched-earth strategy to thwart debt-cutting efforts.
Motions that in many cases would be viewed as mere
housekeeping - for example, Puerto Rico's request to consolidate
the two bankruptcy cases, and to allow banks to continue
honoring transfers and deposits - have already been met with
staunch objections from creditors.
The bankruptcy promises to be lucrative for lawyers and
financial advisers who represent the parties involved in the
proceeding. Between the two cases, already more than 100 lawyers
have requested permission to appear before Swain, court filings
(Reporting by Nick Brown; editing by Daniel Bases and Diane