Client Alert
In a decisive opinion, the U.S. Court of Appeals for the First Circuit affirmed a lower court ruling that the Puerto Rico Public Corporations Debt Enforcement and Recovery Act is preempted by the U.S. Bankruptcy Code and therefore unconstitutional. Given this ruling, in order to restructure the debt of its public corporations, absent a consensual agreement with unanimous support, Puerto Rico must now turn to Congress, and obtain an amendment to the Bankruptcy Code that would allow it to authorize its public corporations to file for protection under Chapter 9, the municipal bankruptcy provisions of the Bankruptcy Code.
