Puerto Rico debt holders are scrambling after the island filed for one of the biggest local government bankruptcies in U.S. history. Conway Gittens reports.
BROADCAST AND DIGITAL RESTRICTIONS~** Broadcasters: NONE Digital: NONE** Holders of Puerto Rican debt scrambling Thursday - one day after the island filed for what is technically the biggest ever bankruptcy of a local government in U.S. history. Putting the process of figuring out who gets paid - and how much - into the hands of the court, is just the beginning of what is likely to be a long and difficult process, says Reuters correspondent Nick Brown. "We're not exactly sure of how much of Puerto Rico's $70 billion in debt are going to be included in this filing but probably the bulk of it. It's going to be really tough because they are a few different fights that need to be had. On the one hand, creditors can't agree with each other about who has priority over whom. You have creditors whose debt is backed by Puerto Rican sales tax and they think they have a dedicated lien on that revenue stream. And then you have creditors whose debt is backed by the full faith and credit of the Commonwealth and they say - no one can touch that." And that's just round one of the battle. Round two: The fight over how much money the island should spend to pay off its debts.. and where that money should come from.. Puerto Rico is suffering through a decade-long recession, resulting in a massive population flight to the mainland, and for those who remain: 45 percent live in poverty, and 11 percent are unemployed. This whole bankruptcy process could take well over a year to work its way through the courts - in the meantime - Puerto Ricans are likely to see living conditions worsen as officials struggle to find money to pay off what they hope will eventually be a smaller debt AND grow the economy at the same time.