Puerto Rico Begins Hearings To Restructure Billions Of Dollars In Debt
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In a courtroom in Puerto Rico today, the U.S. territory took the first step on a long path to getting its finances in order. A federal judge is overseeing proceedings to restructure more than $120 billion of the island's debt. NPR's Greg Allen was at the opening hearing and filed this report from San Juan.
GREG ALLEN, BYLINE: More than 100 lawyers packed into a courtroom and an overflow chamber today for U.S. District Judge Laura Taylor Swain's first hearing. The judge talked about the historical precedent the case represents, one that she said affects the very life of Puerto Rico and its people. The way forward, she warned, quote, "involves pain and disappointment for many."
She turned her attention to housekeeping measures, but various classes of bondholders asked to be heard, giving a preview of the heated disputes ahead as creditors fight over limited funds. Puerto Rico's government says it has just about one quarter of what it owes creditors each year. Because of that, bondholders with a claim on sales tax revenues want to be taken out of the case.
Outside court, an attorney with the governor's office, Elias Sanchez, argued that the case is best resolved if all bondholders remained part of the proceedings.
ELIAS SANCHEZ: (Speaking Spanish).
ALLEN: "There's no logic to separating the cases," he said. "You could arrive at conflicting decisions." This case is similar to the bankruptcy Detroit went through, but several times larger and different in another way - because Puerto Rico is a territory, it couldn't access U.S. bankruptcy law. As the financial crisis deepened, Congress passed a law last year to help Puerto Rico restructure its debt. After months of negotiations with creditors, this month Puerto Rico filed for bankruptcy under a provision of the new law. That shields the commonwealth from some lawsuits and halted payments to many creditors.
One of the smaller creditors, Jesus Melendez, was in court today. He owns a print shop, and the government owes him $40,000. He's wondering how long he can stay in business.
JESUS MELENDEZ: That's a question I've got to ask myself, you know, how far I could take this. Now, you know, I've got to find out something else to do.
ALLEN: While legal proceedings get underway, in the streets of San Juan the island's financial crisis remains an immediate concern. To cut spending, the government recently shut down more than 180 public schools. It's also proposed cutting $500 million from higher education, prompting a student strike that has shut down classes for 50,000 at the University of Puerto Rico. Despite the stakes, few members of the public attended today's hearing.
Ana Portnoy, a graduate student at the university, explained why she was there.
ANA PORTNOY: Puerto Rico's stifling debt, the lack of agency I think we all feel as a people, and my profound concern for Puerto Rico.
ALLEN: This was the opening hearing of what's expected to be a long legal process, one expected to take at least a year and a half and perhaps much longer. Greg Allen, NPR News, San Juan, Puerto Rico. Transcript provided by NPR, Copyright NPR.