Puerto Rico seeks protection of federal bankruptcy code

SAN JUAN, Puerto Rico (AP) — Puerto Rican officials today sought to convince U.S. legislators that the island's financially struggling public corporations should be allowed to restructure their debt under the federal bankruptcy code.

The push comes after a federal judge ruled a local debt-restructuring law pushed through last year by Puerto Rico's governor was unconstitutional.

Melba Acosta, president of Puerto Rico's Government Development Bank, was among those who testified before a U.S. House Judiciary Committee hearing in Washington.

"The fiscal and economic situation in Puerto Rico has reached a critical moment," she said. "If the public corporations default on their obligations and there is no clear legal regime, creditors may attempt to engage in a race to the courthouse."

Puerto Rico's delegate to Congress, Pedro Pierluisi, has filed a bill seeking to allow the island's state-owned corporations to file for Chapter 9 bankruptcy if needed. It would not apply to debt issued directly by Puerto Rico's government.