NEW YORK (Reuters) - Bankruptcy for Puerto Rico is looking ever more likely as the clock ticks down toward a May 1 deadline to restructure $70 billion in debt, ramping up uncertainty for anyone betting on returns from the island's widely held U.S. municipal bonds.
When U.S. Congress last year passed the Puerto Rico rescue law dubbed PROMESA, it froze creditor lawsuits against the island so its federally appointed oversight board and creditors could negotiate out of court on the biggest debt restructuring in U.S. municipal history.
The freeze expires on May 1, however, and an extension by Congress is "not going to happen," said a Republican aide to the House Committee on Natural Resources, which is in charge of territory matters.
A round of mediated talks is scheduled to begin on Thursday. But absent an agreement soon, a growing number of analysts say Puerto Rico will seek protection from creditors under PROMESA's court-sanctioned restructuring process, akin to U.S. bankruptcy.
Forbearance deals could let negotiations continue past May 1, but a source directly involved in the talks said avoiding an eventual bankruptcy is "impossible."