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Puerto Rico's Debt Dilemma and Pathways Toward Sovereign Solvency

47 Pages Posted: 22 Aug 2016 Last revised: 12 Sep 2017

Stephen Park

University of Connecticut - School of Business

Tim R Samples

University of Georgia - Terry College of Business

Date Written: January 27, 2017

Abstract

Puerto Rico, as a quasi-sovereign U.S. territory, is confronting a debt crisis of unparalleled legal complexity. This article analyzes the collective action problems in sovereign debt finance in the context of Puerto Rico’s quasi-sovereign debt dilemma. We examine how sovereign debtors engage with their private creditors in the absence of a formal bankruptcy regime and show how various legal incentives, imperatives, and constraints shape the degree and form of creditor engagement. Drawing on this conceptual framework, this article analyzes the role of these factors in the market-based debt restructuring by the Puerto Rico Electric Power Authority (PREPA) and hypothesizes how these factors may influence the statutory restructuring process underway under the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). Despite the idiosyncratic aspects of Puerto Rico’s debt crisis, the potential pathways for debtor-creditor cooperation in Puerto Rico provide valuable insights on the various ways that law influences debtor-creditor cooperation in sovereign debt finance beyond the enforcement of state-based public regulation and contract-based private legal commitments.

Keywords: Sovereign Debt, Quasi-Sovereign Debt, Debt Restructuring, Creditor Committees, Puerto Rico, PROMESA, International Financial Regulation, Global Governance

Suggested Citation

Park, Stephen and Samples, Tim R, Puerto Rico's Debt Dilemma and Pathways Toward Sovereign Solvency (January 27, 2017). American Business Law Journal, Vol. 54, No. 1, 2017. Available at SSRN: https://ssrn.com/abstract=2826301

Stephen Park (Contact Author)

University of Connecticut - School of Business ( email )

Storrs, CT 06269
United States

Tim R Samples

University of Georgia - Terry College of Business ( email )

Brooks Hall
310 Herty Drive
Athens, GA 30602-6269
United States

HOME PAGE: http://www.terry.uga.edu/directory/profile/tsamples/

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