Puerto Rico approves debt freeze bill

        Puerto Rico

Puerto Rico

FT – Puerto Rico approved legislation early Wednesday that would allow the US territory to impose a moratorium on its debt obligations as the commonwealth struggles with an intensifying financial crisis.

The passage cast into doubt months of restructuring negotiations with policymakers in Washington and with bond holders in New York and increased the risk of protracted litigation, days after creditors filed suit over other emergency measures undertaken to preserve the livelihood of the island’s influential finance authority, US capital markets correspondent Eric Platt reports.

Following two back-to-back sessions of late-night debate, the island’s House of Representatives passed legislation that would confer the power to Governor Alejandro García Padilla to declare a state of emergency and halt payments to creditors until January 2017.

The bill would affect debts issued by Puerto Rico and its various authorities and public corporations, including the Government Development Bank for Puerto Rico, the island’s de facto finance authority. It would also touch Puerto Rico’s most senior notes, including general obligation debt and bonds backed by sales taxes.

The legislation, which previously passed in the Puerto Rico Senate, is expected to be signed into law by governor García Padilla shortly.

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