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Puerto Rico Bankruptcy: What Investors Should Do

May 05, 2017

On Wednesday, May 3, Puerto Rico filed what is equivalent to bankruptcy, setting into motion features of special legislation signed into law in 2016.

Decisions to Rest with Judge

As with any bankruptcy, the fate of direct investors in Puerto Rico debt is dependent on how their debt was structured, secured or unsecured, but in Puerto Rico's case, the eventual decision of who gets paid, and how much, will rest highly with the judge appointed to oversee the case. In this particular case, following the special legislation, the judge making those decisions will most likely not be a bankruptcy judge but a life-tenured judge who will be appointed by U.S. Supreme Court Chief Justice John Roberts.

Investor Next Steps

Whether Puerto Rico is able to restructure itself without outside financial assistance remains to be seen, but investors in Puerto Rico debt should be discussing financial options with their financial advisors and tax professionals to plan accordingly. If your business involves operations in or with the Puerto Rico government or a business in Puerto Rico, anticipate how the bankruptcy filing by Puerto Rico will affect your operations and cash flow. 

Contact your Eide Bailly professional or a member of our international tax team to learn more.