While Puerto Rico is on a path to a historic debt restructuring, the commonwealth still faces legal challenges. Hedge funds and insurance companies are seeking to stop the island from redirecting revenue and imposing a moratorium on debt payments, with two suits emerging even after the passage of the Promesa bill.
The U.S. law, which means promise in Spanish, creates a federal control board that will oversee debt negotiations and seek to end Puerto Rico’s habitual budget deficits. It also aims to halt ongoing lawsuits and prohibits creditors from suing for repayment. Debt holders have still found ways to use the courts to protect their investments. The firms are contesting Puerto Rico’s claim that existing suits fall within the stay or claim the island’s fund transfers violate the Promesa law.