Federal Judge Signs Plan to Resolve Puerto Rico's Bankruptcy in a Record-Setting Move The plan comes nearly five years after Puerto Rico filed for the largest municipal bankruptcy in U.S. history.

By Chloe Arrojado

entrepreneur daily

RICARDO ARDUENGO | Getty Images

On Tuesday, U.S. District Court judge Laura Taylor Swain signed a plan for Puerto Rico that sets the record as the largest public-sector debt restructuring deal in U.S. history. According to Swain's ruling, the U.S. territory's debt will be reduced from $33 billion to $7.4 billion — around an 80 percent cut.

"The provisions of the plan constitute a good faith, reasonable, fair, and equitable compromise and settlement of all claims and controversies resolved pursuant to the plan," Swain said in the ruling.

Related: These 2 Franchisees in Puerto Rico Survived Hurricane Maria and Lived to Tell What They Learned

Puerto Rico has had financial problems over the years, declaring bankruptcy in 2017 after it announced it couldn't pay the more than $70 billion debt it had accumulated. The debt, while partly accumulated through mismanagement and excessive borrowing, was further exacerbated by natural disasters and the pandemic.

Under this new debt payment structure, Puerto Rico will only have to pay $666 million a year for the first 10 years, instead of $1.6 billion annually. The territory is expected to have budget surpluses through the mid-2030s but might have problems funding its pension system, which owes its present and future retirees an estimated $55 billion.

In a statement, Puerto Rico governor Pedro Pierluisi said that while this new plan isn't perfect, the debt restructure is a good move for the future of the territory.

"The agreement, while not perfect, is very good for Puerto Rico and protects our pensioners, university and municipalities that serve our people," Pierluisi said. "We still have a lot of work ahead of us."

Related: How Entrepreneurship Is Helping to Save Puerto Rico

Chloe Arrojado

Entrepreneur Staff

Editorial Assistant

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Related Topics

Business News

I Tried 3 AI Headshot Generators and There Was a Clear Winner

Aragon AI, Momo, and FastShot AI all generate headshots using AI, but which one actually works for LinkedIn?

Business Ideas

55 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Marketing

Enhance Your Website's Visibility and Dominate Your Competition With These Powerful Techniques

Mastering backlinks and content intent is key to ranking higher on search engines. Our guide can help you learn the right techniques and strategies for improving your backlinks and content quality.

Leadership

Why Saying "I Don't Know" Makes You a Better Leader

Great leaders do not have all the answers. "I don't know" may come across as three simple, innocuous words, but they do have the power to make business stronger.

Productivity

SMART Goals May Be Holding You Back — Try This Effective Goal-Setting Technique Instead

Everyone suggests SMART goals, but this framework is flawed. Learn why and how to create goals properly — ones that you can actually achieve.

Business News

2024 Could Be the Year that Makes or Breaks a Lot of Small Businesses, According to a New Report

About a third of small business owners indicated on a Slack survey that they aren't sure if their businesses will survive the year.