Puerto Rico is looking to file bankruptcy after negotiations with bondholders failed to restructure $70 million worth of debt. The bankruptcy would occur until Title III of the Promesa law, a law passed last year in an effort to aid the territory. Prior to enactment of the legislation, Puerto Rico would have been barred from any bankruptcy filing as a US territory. Should the bankruptcy proceed, the process would be similar to court-mediated debt restructurings common for other entities in the United States. Puerto Rico debt is currently about 70% of its GDP, among states the highest figure belongs to Rhode Island with a debt load of about 15% of GDP.
Puerto Rico estimates it has about $800 million a year available for debt servicing, far below the $3.2 billion now required. About $.70 on the dollar was offered to creditors, who were unwilling to go below $.90.
Puerto Rico is also facing an unemployment rate above 12% and high levels of poverty. The average income in Puerto Rico is about $35,000 compared to close to $60,000 in the remainder of the United States.
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