Puerto Rico officially exits bankruptcy

Puerto Rico officially exited bankruptcy on Tuesday after it was unable to pay a debt of more than $70 billion, completing the largest public debt restructuring in U.S. history.

Now that the country is officially out of bankruptcy, Puerto Rico can resume billion-dollar payments to bondholders, settle around $1 billion worth of claims, and issue more than $10 billion worth of bonds, reported the Associated Press.

“This is a significant success,” said Natalie Jaresko, executive director of the federal control board that oversees Puerto Rico’s finances and its debt restructuring process. “Remaining in bankruptcy has been a drag on the economy in multiple ways.”

Puerto Rico owed more than $70 billion of public debt and $50 billion in public pension liabilities due to corruption, mismanagement, and excessive borrowing. In 2016, the U.S. Congress created a deferral board to oversee the island’s financial status.

In 2017, the Puerto Rican government filed for the largest municipal bankruptcy in the history of the U.S.

A federal judge approved the island’s debt restructuring plan in January. The plan reduces claims against Puerto Rico from $33 billion to around $7.4 billion. Seven cents of every taxpayer dollar are going to debt service.

The plan also will create a public pension reserve that expects to have more than $10 billion in the following years.

Despite celebrating this milestone, the island might not be able to access financial markets soon, explained Jaresko. She added that Puerto Rico needs to get its audited financial statement up to that before that could happen.