SAN JUAN, Puerto Rico (AP) — Bondholders filed to sue Puerto Rico Tuesday in the first legal challenge that hit the U.S. territory after a freeze on litigation that protected it from lawsuits expired amid a deep economic crisis.
A group representing those who bought $16 billion worth of bonds backed by Puerto Rico's sales tax said in the lawsuit that a government plan to cut its $70 billion debt is unconstitutional. The group accused government officials of strong-arming it into what it called "unfair, unjust, and illegally punitive terms."
The lawsuit is expected to be one of several as bondholders seek to recuperate the millions of dollars they invested in Puerto Rico government bonds. Puerto Rico already faced about a dozen lawsuits before the litigation freeze was implemented as part of a rescue package that U.S. Congress approved last year.
The newest suit comes after the administration of Gov. Ricardo Rossello failed to negotiate any deal with bondholders after the May 1 deadline of the litigation freeze. Puerto Rico has defaulted on $1.3 billion of principal owed since the previous governor declared the $70 billion public debt load unpayable in June 2015.