Puerto Rico’s Governor Alejandro Garcia Padilla today introduced debt restructuring legislation which he urged the legislature to enact by June 30 and which, if enacted, would provide a judicial debt relief process in Puerto Rico’s courts for certain public corporations, including the Puerto Rico Electric Power Authority (“PREPA”), the Puerto Rico Aqueduct and Sewer Authority (“PRASA”) and the Puerto Rico Highways and Transportation Authority (“PRHTA”).  Despite a semantic effort at today’s press conference by the Governor and in the legislative preamble to distinguish the proposed leg

Last Tuesday, Puerto Rico sold its much-ballyhooed $3.5 billion in non-investment grade general obligation bonds. Two days later, two legislators in Puerto Rico’s Senate filed a bill which, if enacted, would permit insolvency filings by Puerto Rico’s public corporations in Puerto Rico’s territorial trial court. The juxtaposition of the two events has some bond investors crying foul.

The U.S. Court of Appeals for the Second Circuit has upheld a bankruptcy court’s decision enforcing indenture language providing for the automatic acceleration, without make-whole premium, of secured American Airline, Inc.

A recent ruling in the American Airlines bankruptcy case enforcing an automatic acceleration upon bankruptcy provision serves as a reminder that the enforceability of so-called ipso facto provisions in debt instruments remains an unsettled, forum-dependent question.