Puerto Rico under danger of bankruptcy as $70 bn debt restructure deadline impending

Bankruptcy for Puerto Rico is looking ever more likely as the clock ticks down toward a May 1 deadline to restructure $70 billion in debt, ramping up uncertainty for anyone betting on returns from the island's widely held U.S. municipal bonds.

This is reported by Reuters.

When U.S. Congress last year passed the Puerto Rico rescue law dubbed PROMESA, it froze creditor lawsuits against the island so its federally appointed oversight board and creditors could negotiate out of court on the biggest debt restructuring in U.S. municipal history.

The freeze expires on May 1.

A round of mediated talks is scheduled to begin on Thursday. But absent an agreement soon, a growing number of analysts say Puerto Rico will seek protection from creditors under PROMESA's court-sanctioned restructuring process, akin to U.S. bankruptcy.

Forbearance deals could let negotiations continue past May 1, but a source directly involved in the talks said avoiding an eventual bankruptcy is "impossible."

Bankruptcy is now "the most likely outcome," said Height Securities analyst Ed Groshans, who increased loss projections for bond insurers like MBIA Inc and Assured Guaranty Ltd in an April 3 note.