On February 6th, Federal District Judge Francisco Besosa ruled that Puerto Rico’s municipal debt-restructuring law, the “Recovery Act”, was unconstitutional stating that:  “The Recovery Act is pre-empted by the federal Bankruptcy Code and is therefore void.”  The Court also permanently enjoined current and future government officials from enforcing the Act.  Puerto Rico has announced that it will be appealing the ruling.

Illinois’ municipal distress is severe and we have witnessed the political maneuvers  to address Chicago’s ongoing fiscal dilemma.  In 2013, Chicago Mayor Rahm Emmanuel stoked bankruptcy fears citing the city’s ballooning pension obligations that he estimated could exceed $1.6 billion in 2016.  Pew Charitable Trusts has reported that among the nation’s five largest cities, Chicago has put aside the smallest portion of its looming pensions obligations.  While certain changes have been made to counter the pension funding deficit, including Governor Quinn’s hotly contested

Say what you will about Detroit’s bankruptcy case, but when it is all said and done, the value for each of its participants most likely lies in the learning experience.   And, experience is sometimes a painful teacher.   One of the many take-aways is a framework for what constitutes a workable or“feasible” plan of adjustment (“Plan” or “Plan of Adjustment”) while recognizing the significant risk of implementation and post bankruptcy performance.

Detroit Highlights