HOUSTON (Reuters) - The devastating blows dealt to Puerto Rico by Hurricanes Irma and Maria are putting the woebegone U.S. territory’s bankruptcy on the backburner, sources said on Thursday.
According to a person familiar with the bankruptcy proceedings, the team of judges overseeing the case has directed parties to put legal issues on hold indefinitely, as the territory recovers from an unprecedented one-two punch of natural disasters.
According to the person, judges have also told parties the island’s fiscal turnaround blueprint may need to be redrafted once the cost of the destruction becomes clear, as well as how much aid Puerto Rico is expected to get from the U.S. Federal Emergency Management Agency.
Maria was ranked a Category 4 storm, near the top of the five-step Saffir-Simpson scale, with winds of up to 155 mph (250 kph), when it made landfall on Puerto Rico on Wednesday as the strongest storm to hit the island in nearly 90 years.
It struck less than two weeks after Hurricane Irma wreaked havoc there. Officials in Puerto Rico have said power could be out for months, while devastating flooding continues to ravage low-lying areas on the mountainous Caribbean isle.
Puerto Rico is already reeling under a $72 billion debt load it cannot pay. Earlier this year, it filed the biggest government bankruptcy in U.S. history, suffering from near-insolvent public health and pension systems, a 45 percent poverty rate, and a shrinking population as locals flee to the mainland United States.
A separate source, familiar with the Puerto Rican government’s thinking, said a moratorium on legal proceedings will likely be necessary, including the possible cancellation of a scheduled Oct. 4 bankruptcy hearing, though that remained unclear.
“Puerto Rico won’t be functional at all for two or three weeks, and won’t be fully functional for at least a month,” the person said.
“The government is living basically like a family that lives paycheck to paycheck, and the paychecks aren’t going to get here because our treasury is not going to be able to collect anything,” the person said.
Spokespersons for Governor Ricardo Rossello and Puerto Rico’s federal oversight board did not immediately respond to requests for comment. A representative for Judge Laura Taylor Swain, the lead judge in Puerto Rico’s bankruptcy, could not immediately be reached.
The sources requested anonymity to discuss the matter, which has not been announced publicly.
Editing by Bernadette Baum