The typical secured creditor would not expect to confront (or be permitted to raise) constitutional issues in a financing or restructuring. But the financial crisis in Puerto Rico is notable not only for the sheer enormity of its economic scope; it has also indeed brought creditors face-to-face with issues of constitutional proportion.
The economic environment in Puerto Rico has clearly reached a critical breaking point. With over $70 billion of debt outstanding, Puerto Rico’s public debt is approximately 99 percent of its gross domestic product, compared to about 6.5 percent for the typical state.1 According to Moody’s Investors Service, on a per-capita basis Puerto Rico has more than 15 times the median bond debt of the 50 states.2 Moreover, a recently-released report commissioned by the Government of Puerto Rico states that only 40 percent of the adult population—versus 63 percent on the U.S. mainland—is employed or looking for work.3
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