Joel R. Glucksman
Partner
201-896-7095 jglucksman@sh-law.comKey Contacts
Back
Puerto Rico’s troubling debt position threatens its economic viability, and without Chapter 9 bankruptcy protection as an option, the unincorporated U.S. territory is facing a critical financial situation.
The commonwealth’s economy heavily depends on tourism, which has plummeted recently due to declines in Americans’ discretionary spending. In response, the island has been operating largely on bank credit and other short-term measures that are not only unsustainable, but have raised its borrowing costs to a record high, Bloomberg reports. As a further cause for concern, Bloomberg notes that approximately 77 percent of municipal-bond mutual funds hold Puerto Rico debt. Should the island continue to struggle, the federal government may need to step in, a scenario that is unprecedented, the New York Times reports.
The Times notes that Puerto Rico’s debt stands at $87 billion – or $23,000 for every resident. In addition, the territory is struggling to protect its local economy as large swaths of its 3.7 million residents are fleeing the island in search of better economic opportunities. However, unlike U.S. cities and counties that are permitted to seek municipal bankruptcy protection under Chapter 9 of the bankruptcy law, this option is not afforded to Puerto Rico. Under existing legislation, U.S. states and territories lack the ability to declare bankruptcy, leaving Puerto Rico with limited options.
However, Gov. Alejandro Garcia Padilla has noted that the island is not bankrupt in the legal sense of the word, and will continue making strides in overcoming its burdensome debt condition. Despite his optimism, the small commonwealth is graded one step above junk by the three major rating firms and is expected to borrow as much as $1.2 billion by the end of 2013, Bloomberg reports.
Padilla and government officials continue to travel to New York and Washington to discuss different options, one of which is allowing Congress to establish a financial control board to assist the island during its financial turmoil.
- Practices: Corporate Transactions & Business, Bankruptcy & Creditors' Rights, Bankruptcy Litigation
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
A Whistleblower Just Filed a Complaint Against Your Company: Here's What to Do Now
Few situations create more uncertainty than learning that an employee has filed a whistleblower complaint. Questions arise immediately: Is the allegation legitimate? Should the employee be placed on leave? Do we need to notify our insurance carrier? Are we now prevented from disciplining the employee if there are unrelated ongoing work related issues? There is […]
Author: Sean M. Pena
Assignment for the Benefit of Creditors: An Alternative to Bankruptcy for Distressed Businesses
When a business reaches the point where it can no longer service its debts or otherwise resolve its liabilities, management is often faced with a difficult question: is a bankruptcy filing necessary or is there another way to perform an orderly liquidation or sale of the business assets? While Chapters 7 and 11 of the […]
Author: John D. Giampolo
Breaking Down New Jersey’s “Mansion” Tax: What Buyers and Sellers Need to Know
For many years, the New Jersey Mansion Tax has been a significant consideration in high-value real estate transactions. Recent legislative changes, however, have substantially altered how the tax operates, including who is responsible for paying it and the amount owed in certain transactions. Whether you are purchasing, selling, or investing in New Jersey real estate, […]
Author: George McGowan
Estate Planning for Digital Assets Under New Jersey Law
As our personal and financial lives increasingly move online, estate planning must evolve to address a new category of property: digital assets. From email accounts and social media profiles to cryptocurrency and cloud-stored business records, these assets often carry both financial and sentimental value. Yet, without proper planning, they can become inaccessible—or even lost—upon incapacity […]
Author: Marc J. Comer
The Role of Representation and Warranty Insurance in M&A Transactions
In today’s mergers and acquisitions market, representation and warranty (R&W) insurance has become a common feature of deal negotiations. Once used primarily in larger transactions, R&W insurance is now frequently incorporated into middle-market deals as buyers and sellers look for efficient ways to allocate risk and close deals. When structured properly, R&W insurance can help […]
Author: George McGowan
You Just Received a Federal Grand Jury Subpoena in New Jersey: Now What?
Receiving a federal grand jury subpoena is not something most businesses or individuals anticipate. While it can be concerning, a federal grand jury subpoena does not necessarily mean that you are being accused of wrongdoing. It does, however, mean that a federal criminal investigation is underway and that federal prosecutors believe you may possess information […]
Author: Sean M. Pena
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.