Puerto Rico Debt Crisis: A Timeline


August – Puerto Rico’s Economy Continues to Recover; Better-Than-Expected Sales-Tax Revenues Reported – Puerto Rico’s economic recovery continued to gain steam, with seven straight months of improvement in the Government Development Bank’s (GDB) Economic Activity Index (EAI) as well as better-than-expected sales-tax revenues.

August 8 – U.S. Appeals Court Rules that Creditors of PREPA Are Not Barred From Seeking Stay Relief – The U.S. Court of Appeals for the First Circuit vacated a lower court ruling denying a request for relief from the automatic stay, upholding Puerto Rico Electric Power Authority (PREPA) bondholders and bond insurers’ rights to obtain relief from the bankruptcy stay, so that they can seek placement of the utility into receivership.

August 7 – Title III Court Rules That the Oversight Board Can Make Binding Policy Choices through Fiscal Plans and Budgets – Judge Laura Taylor Swain, overseeing the Commonwealth’s Title III bankruptcy case, rules that PROMESA allows the Oversight Board to make binding policy choices for the Commonwealth through its powers relating to fiscal plans and budgets, notwithstanding the objections of the island’s government.

July 5 External Auditors Unable to Verify PR Financial Statements – The Puerto Rico government submitted its consolidated fiscal year 2014-2015 financial statement years past deadline. External auditors could not verify that the information provided in the document was reliable.

May 31 Emergency Aid Approved: The Federal Transit Administration announces plans to allocate $223.5 million of emergency relief funds to Puerto Rico public transportation systems. Separately, FEMA awards nearly $220 million in grants to the Puerto Rico government and municipalities, out of $2.2 billion its Public Assistance program has obligated to the island

May 30 – $6.1b Surplus Estimated: FOMB certifies another revised six-year fiscal plan that reduces the projected pre-debt surplus to $6.1 billion

May 23Fiscal Plan Challenged in Court: Complaint challenging legality of the fiscal plan, re-filed by Assured Guaranty, cites violations of PROMESA and the U.S. Constitution, including failure to distinguish essential and nonessential expenses, disrespecting lawful debt priorities and liens, allowing agency funds to be diverted to other agencies or the Commonwealth, and failing to comply with the U.S. Constitution’s contracts, takings, and due process clauses

May 20 — FOMB Waives Labor Provisions in Fiscal Plan: FOMB agrees to waive the provisions in the certified Fiscal Plan, calling for the abolition of the government-mandated, year-end bonus and reduction of the island’s mandatory 27 days of vacation and sick leave, provided that Puerto Rico repeals its law prohibiting employers from laying off employees without cause

May 16Cash Projection Up 7%: Puerto Rico discloses cash position 7% ahead of projections made before Hurricane Maria

May 13FOMB Rejects GO/COFINA Bondholders Agreement: Groups representing holders of general obligation and COFINA bonds agree on division of sales tax revenue and submit plan to FOMB, which rejects it immediately

May 11FOMB Rejects Proposed Budget: FOMB rejects Commonwealth’s proposed budget as inconsistent with fiscal plan. The budget provides nothing for debt service despite $6.7 billion of debt payment ability in the certified fiscal plan through 2023; the budget also includes expenditures not authorized in the fiscal plan, reflecting the Governor’s refusal to implement pension and labor reforms required by the FOMB

May 9History of Systemic “Financial Malpractice” Identified: GAO releases report that Chairman Bishop praises for “identifying the systematic financial malpractice of the Puerto Rico government over the past half century”

April 30Disaster Aid Approved: U.S. Department of Education announces disaster assistance, including $589 million for Puerto Rico schools

April 19FOMB Fiscal Plan Approved, Gives Billions to Litigation: FOMB imposes and approves its own Revised Fiscal Plan, under which the Commonwealth is projected to have a surplus after six years and sufficient cash flow to pay for essential public services and constitutionally guaranteed debt payment; in spite of this, the plan allocates billions for litigation to defend debt extinguishment instead of negotiating with creditors for a consensual restructuring

April 5 Commonwealth Disregards FOMB Requests: The Puerto Rican government submits another revised Fiscal Plan, which disregards FOMB requests for pension and labor reforms

March 29Chairman Bishop Frustrated with FOMB Failures: In letter to FOMB, Chairman Bishop, whose House Natural Resources Committee developed PROMESA, reiterates his frustration with the board’s lack of creditor engagement and failure to mandate reforms to achieve PROMESA’s dual purpose of establishing fiscal responsibility and restoring capital market access

January 22Governor Proposes PREPA Privatization: Governor Rosselló announces intention to privatize PREPA

January 9 Cash Balances Delay FEMA Funds: Citing significant cash balances in Puerto Rico accounts, FEMA says it will delay release of emergency funds

January 6 — Feds Seize PREPA Equipment: FEMA and armed federal agents discover and seize critical equipment which PREPA was warehousing rather than making it available for power restoration


December 20, 2017 – March 28, 2018 : Six Versions of Fiscal Plan Omit Debt Payments— The Commonwealth submits six iterations of a fiscal plan, each rejected by the FOMB; each iteration indicates the availability of greater resources for paying the debts but makes no allocation for making debt payments

December 22 — 12.5% Foreign Import Tax Imposed: Federal tax law enacted, imposing on Puerto Rico companies a 12.5% “foreign import” tax on intangible asset income, a critical source of income for the pharmaceutical and medical device sectors

December 18$5 Billion in Extra Cash Leads to Transparency Questions: Puerto Rico discloses $5 billion more in cash than it had disclosed three weeks earlier, furthering evidence of inadequate financial controls and transparency

November 20 – Commonwealth Employees to Get Bonuses Amid Insolvency Claims: Puerto Rico announces it will pay year-end government employee bonuses despite claims of insolvency and over objections of FOMB

October 30 — Infamous Whitefish Contract Cancelled: PREPA cancels infamous Whitefish power restoration contract, emblematic of mismanagement and corruption at PREPA, and throughout island government

October 26Disaster Relief in Billions to Aid PR: President Trump approves $36.5 billion in disaster relief funding, including up to $5 billion to assist Puerto Rico’s central government and municipalities

October 13 — AG Voluntarily Withdraws PREPA Complaints In Face of Hurricane: In response to the humanitarian circumstances following Hurricane Maria, Assured Guaranty voluntarily withdraws complaints against PREPA and the Commonwealth’s Fiscal Plan, urging the FOMB to use the opportunity to work with creditors toward a new, and lawful, fiscal plan

September 20Hurricane Maria Makes Landfall: Hurricane Maria makes landfall in Puerto Rico, causing significant damage and power outages across the island

September 14PREPA Receivership Request Denied: Judge Swain rejects creditors’ plea to exercise their statutory and contractual rights to request appointment of a receiver to manage PREPA; in her decision, she said that appointing a receivership was “facially inconsistent” with the terms of Puerto Rico’s federal rescue package.

July 13 — Court-Ordered Mediation Begins

June 15 – July 7Chairman Bishop Demands FOMB Approve PREPA RSA; FOMB Rejects It: Chairman Bishop writes to the FOMB that its failure to approve the PREPA RSA that was approved by the utility, its creditors, and the Commonwealth violates PROMESA, which contained specific language to grandfather the deal. Creditors sue to compel FOMB to approve the RSA, but FOMB nevertheless rejects it, forcing PREPA into Title III.

June 14Senator Cotton Rebukes FOMB: Tom Cotton writes to FOMB demanding it comply with PROMESA by enforcing lawful debt payment priorities and liens and notes that the board’s failure to do so could cause retail mutual fund investors to lose $5.4 billion

June 5Assured Guaranty Files Adversary Complaint: Assured Guaranty files adversary complaint, challenging the diversion of PRHTA debt payments, as it violates well-established treatment of special revenues during bankruptcy proceedings

May 31 Budget Fails to Prioritize Debt Payment: Puerto Rico releases budget elevating payment priority of all operating and pension expenses above constitutionally guaranteed general obligation debt, indicating zero dollars for debt service

May 30COFINA to Freeze Payments: Judge Swain orders COFINA trustee to freeze payments to sales-tax bondholders

May 17Hearing Over Sales Tax Revenue Dispute Held: Judge Swain holds first hearing in Title III cases of the Commonwealth and COFINA, which dispute how sales-tax revenue should be distributed

May 4 — First Lawsuit Filed by Assured Guaranty: First lawsuit challenging the fiscal plan is filed by Assured Guaranty

May 3 – 22FOMB Runs Around PROMESA Requirements: Circumventing the PROMESA requirement to conduct out-of-court negotiations before employing Title III, FOMB seeks Title III protection for the Commonwealth, COFINA, the Highways and Transportation Authority, and the Employees Retirement System

May 1 — Medicaid Funding of $295 Million Secured: Puerto Rico secures $295 million in Medicaid funding

April 29Governor Signs Acts, Neglects Debt Repayment — Rosselló signs the “Fiscal Plan Compliance Act,” which lacks provisions for debt repayment

April 7Senators Call Out FOMB Failures: U.S. Senators Tom Cotton and Thom Tillis write letter to FOMB pointing out that Puerto Rico’s fiscal plan does not comply with PROMESA

April 6PREPA RSA Finds Support in Governor: Gov. Rosselló supports PREPA RSA after negotiating modifications with PREPA and its creditors

March 1-13Fiscal Plan Rejected, Revised, Accepted: Governor Rosselló releases a new fiscal plan, which FOMB rejects, and then — after a revision — accepts

January 2 Rosselló Win Comes With Fiscal Emergency Declaration: Rosselló succeeds Padilla as Puerto Rico’s governor, declares fiscal emergency and demands 10% spending cut across all agencies


December 21Congressional Task Force Makes Key Recommendations: The Congressional Task Force on Economic Growth in Puerto Rico releases its final report, recommending, among other things, increased federal Medicaid funding tied to better financial controls; congressional consideration of more competitive tax treatment of companies that generate economic activity and employment on the island; and inclusion of Puerto Rico in federal statistical programs.

November 23FOMB Fiscal Plan Criteria Set: FOMB requests Fiscal Plan revisions, including debt sustainability analysis, and sets 14 criteria the plans must meet

October 14Padilla Files Proposed Fiscal Plan: Gov. Padilla files a proposed fiscal plan with the FOMB

September 30FOMB Meets For The First Time

August 31President Obama Names FOMB Members

July 1Puerto Rico Skips $800 Million of G.O. Debt Payments: Puerto Rico defaults on approximately $800 million of general obligation debt, the first of the defaults on its constitutionally guaranteed debt

June 30President Obama Signs PROMESA Into Law: The bill establishes the FOMB to ensure Puerto Rico’s fiscal responsibility and access to capital markets; PROMESA also establishes a Congressional Task Force on Economic Growth in Puerto Rico. Title III of PROMESA creates a bankruptcy-like procedure to adjust debt, and Title VI encourages and provides a legal framework for consensual restructurings. Full text.

June 13SCOTUS Upholds 2014 Recovery Act: The U.S. Supreme Court upholds a decision in a 5-2 vote invalidating the 2014 Recovery Act, which intended to allow the island’s public entities to restructure debt

May 2$400 Million GDB Debt Defaults: GDB defaults on approximately $400 million in debt payments due

April 6 – Law Imposes Moratorium on Debt Payments: Governor Padilla signs a law allowing him to impose a moratorium on debt payments.

February 15Commonwealth Passes Revitalization Act: Puerto Rico’s House of Representatives passes the Revitalization Act, which contains reforms to facilitate the PREPA RSA.

January 7 Constitutionality of the Clawback Order Challenged: Assured Guaranty files suit challenging the constitutionality of the Clawback Order

January 4$37 Million Default and $174 Million Clawback: Puerto Rico defaults on $37 million and claws back $174 million of public corporation debt payments, while paying all $329 million of principal and interest due to general obligation bondholders


December 1Puerto Rico Narrowly Avoids Default By Clawback: The Commonwealth avoids defaulting on $354 million of debt payments on general obligation and Commonwealth-guaranteed bonds, partly by clawing back revenue from public corporations. The island’s governor announces Commonwealth will continue to redirect revenue designated for future debt payments to pay for government services.

November 30Governor Issues Unlawful Clawback Order: Gov. Padilla issues the Clawback Order, allowing unlawful diversion of pledged special revenues (such as those of PRHTA and other public corporations) to pay Commonwealth operating expenses

August 3Puerto Rico Defaults on Debt Payment for First Time: Puerto Rico defaults for first time in its history, paying just $628,000 of a $58 million Public Finance Corporation debt payment.

July 26Economists See Way Out For Puerto Rico Without Default: A group of economists led by former IMF official Claudio Loser releases a report arguing Puerto Rico can resolve its debt crisis without defaulting on Commonwealth debt.

July 1PREPA Reaches Deal With Creditors: PREPA makes a deal with its creditors, under which bond insurers provide liquidity to PREPA to avert default. The deal allows time to conclude a consensual Restructuring Support Agreement (the PREPA RSA).

June 29 — Krueger Report Recommends Reforms and Assistance: The “Krueger Report,” commissioned by GDB and written by a team of former IMF officials led by Anne Krueger, is released. It recommends structural and fiscal reforms; it also calls for federal assistance, such as establishing bankruptcy eligibility and rescinding the Jones Act, which increases costs on the island by preventing non-U.S. ships from carrying goods to and from the U.S. mainland.

June 28 — Debt “Unpayable,” According to Padilla: Governor Padilla declares the island’s debt “unpayable”

February 6Commonwealth’s Recovery Act Judged in Violation of U.S. Bankruptcy Law: A U.S. District Judge strikes down Puerto Rico’s 2014 “Recovery Act,” aimed at allowing its public entities to restructure their debts in Puerto Rico courts, saying the act violates U.S. bankruptcy law.


June 28 — Commonwealth Enacts Law to Restructure Debt Despite Ineligibility: Puerto Rico enacts the “Recovery Act,” allowing public corporations to restructure their debt despite ineligibility for Chapter 9 bankruptcy protection.

February 4-11The Island’s Bonds Are Downgraded: Three rating agencies downgrade Puerto Rico’s bonds to “junk” status

2006 –2014

Commonwealth Issues Bonds That Violate Sound Fiscal Practices: Puerto Rico continues to issue bonds throughout the United States, often to fund day-to-day operations rather than infrastructure investments. Despite some economic deterioration on the island, the bonds are attractive to investors because the Puerto Rico constitution prioritizes debt; the bonds are triple-tax exempt, and U.S. bankruptcy law explicitly excludes Puerto Rico from Chapter 9 relief.


U.S. Phases Out Key Tax Code Incentives: U.S. government starts phase-out of Section 936 of U.S. tax code, which had provided tax incentives for U.S. corporations to operate in Puerto Rico.

The island’s long economic slide begins.

Guide to People and Acronyms

Bishop — Rob Bishop, Chairman of the U.S. House Natural Resources Committee

COFINA — Spanish acronym for the Puerto Rico Sales Tax Financing Corporation

Commonwealth — The Commonwealth of Puerto Rico

FEMA — Federal Emergency Management Agency

FOMB — Financial Oversight and Management Board created by PROMESA

GAO — U.S. General Accountability Office

GDB — Government Development Bank of Puerto Rico

IMF — International Monetary Fund

Padilla — Alejandro Javier García Padilla, Governor of Puerto Rico, 2013-2017

PREPA — Puerto Rico Electric Power Authority

PRHTA — Puerto Rico Highways and Transportation Authority

PROMESA — Puerto Rico Oversight, Management, and Economic Stability Act. (Full text)

Roselló — Ricardo Antonio “Ricky” Rosselló Nevares, elected Governor of Puerto Rico in November 2016 and inaugurated in January 2017

Recovery Act — On June 25, 2014 the Puerto Rico government proposed legislation establishing a process for some of the island’s public corporations to restructure their debts. It was approved and signed into law on June 28 and applied to Puerto Rico Electric Power Authority (PREPA), Puerto Rico Aqueduct and Sewer Authority (PRASA), the Puerto Rico Highway and Transportation Authority (PRHTA), and other entities

Revitalization Act — Signed into law in 2016 by Gov. Padilla, the Puerto Rico Electric Power Revitalization Act which contains reforms to facilitate the PREPA RSA

RSA — Restructuring Support Agreement

Swain — S. District Judge Laura Taylor Swain, presiding judge in Title III cases

Title III — clause in PROMESA creating bankruptcy-like restructuring process for Puerto Rico and its instrumentalities

Title VI — clause in PROMESA creating a framework for consensual debt restructurings