July 25, 2018 / 4:46 PM / a year ago

U.S. Senate liberals seek new Puerto Rico debt relief

WASHINGTON, July 25 (Reuters) - A group of U.S. Senate liberals on Wednesday introduced legislation providing debt relief to Puerto Rico as the island territory struggles to recover from a devastating 2017 hurricane that worsened conditions in an already-suffering economy.

Independent Senator Bernie Sanders and Democratic Senator Elizabeth Warren have joined up with three other liberal Democratic senators in seeking broad debt relief for Puerto Rico and other U.S. territories.

The U.S. commonwealth declared the largest municipal bankruptcy in 2017 under the so-called federal PROMESA law, and is seeking to restructure in court more than $70 billion in debt. It also has another $45 billion or so in unfunded pension liabilities.

“Greedy Wall Street vulture funds must not be allowed to reap huge profits off the suffering and misery of the Puerto Rican people for a second longer,” Sanders said in a statement.

Their initiative is not expected to gain traction in the Republican-controlled Congress, but it could provide hints about what Democrats might pursue if they manage to win majorities in either the Senate or House of Representatives in November’s congressional elections.

The Senate bill would give U.S. territories the option to terminate non-pension debt obligations under certain conditions.

It would provide $7.5 billion for Puerto Rican creditors whose debt is terminated, including Puerto Rican residents, banks and credit unions that did business solely in Puerto Rico.

Another $7.5 billion would be set aside for mainland creditors whose debt was terminated, including individual investors.

Backers of the legislation said the $15 billion in Washington funding would not be made available to hedge funds and their investors, bond insurers or many financial firms with consolidated assets greater than $2 billion.

Congress passed the PROMESA legislation in 2016, which created a seven-member board to manage Puerto Rico’s finances. The law has been under attack in court cases. (Reporting by Richard Cowan in Washington; Additional reporting by Karen Pierog in Chicago; Editing by Daniel Bases and Susan Thomas)

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