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Puerto Rico’s bankruptcy is the next step in its slow dance of default

Last Wednesday, the Financial Oversight and Management Board for Puerto Rico, created by Congress last year, formally requested the appointment of a federal judge to oversee bankruptcy proceedings for the indebted US territory. The proceedings are authorized under Title III of the Puerto Rico Oversight, Management and Economic Stability Act of 2016 (PROMESA).

The well-choreographed move fits into the larger sequence of events intended in PROMESA. A 10-month stay on litigation against the government of Puerto Rico expired last Monday, precipitating a rush to the courthouse by creditors. But with initiation of the Title III bankruptcy proceedings, the stay goes back into place, putting the lawsuits on ice for another 120 days.

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