Puerto Rico Plays Chicken With Its Creditors

Puerto Rico Plays Chicken With Its Creditors - WSJ:
"On Sept. 1 the state-owned Puerto Rico Electric Power Authority (Prepa) faces a deadline for restructuring more than $8 billion in debt. 
If it can’t come to an agreement with creditors, a previous forbearance agreement will expire and the company will face default.
In that event, bondholders could be expected to go to court to begin the process of receivership, as the bond contracts stipulate.
This high-stakes negotiation comes when Puerto Rico is asking Congress to give its municipalities and public agencies access to the chapter 9 bankruptcy protection the 50 states have.
A Prepa default would be disruptive and possibly increase the odds that Congress will agree.
But failure on the part of the utility to negotiate in good faith also could backfire and jeopardize support in Washington for giving Puerto Rico chapter 9 protection.
It could also reduce sympathy on the mainland for the write-down of other Puerto Rico debt issues—which total some $63 billion—that Gov. Alejandro García Padilla says he needs to get the island growing again..."