Federal judge rules in favor of bondholders on Puerto Rico debt

Getty

A federal judge on Friday ruled the U.S. government could be liable for parts of Puerto Rico’s $73 billion public debt.

Judge Susan Braden of the U.S. Court of Federal Claims ruled against the feds in a motion to dismiss a lawsuit by Puerto Rico’s bondholders, who seek to hold the federal government liable for the island’s debt.

{mosads}

In her ruling, Braden concluded that the Fiscal Control Board (FCB) is a federal institution, rather than territorial, since it was created by Congress under the 2016 Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), and its board members are appointed at a federal level.

The FCB was created under PROMESA to ensure congressional oversight of the island’s finances and to set a pathway to recovery from the U.S. territory’s ongoing financial crisis.

In a related ruling Friday, U.S. District Judge Laura Taylor Swain dismissed a lawsuit by a different creditor, saying FCB officials are territorial, rather than federal, officials.

Braden stayed her case until Swain emits a final decision on the FCB’s constitutionality, according to a report by Caribbean Business.

The plaintiffs, in that case, included hedge funds like Glendon Capital and Oaktree Capital Management, reported local newspaper El Nuevo Dia.

Tags Debt Puerto Rico

Copyright 2023 Nexstar Media Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.