Puerto Rico seeks title III bankruptcy protection for COFINA debt

The flag of Puerto Rico flies outside the Capitol building in San Juan, Puerto Rico May 4, 2017. REUTERS/ Alvin Baez

SAN FRANCISCO (Reuters) - Puerto Rico’s federally appointed financial oversight and management board on Friday filed for Title III bankruptcy protection for debt backed by sales tax revenues on the U.S. commonwealth, otherwise known as COFINA.

Title III is an in-court debt restructuring process akin to U.S. bankruptcy that was part of the Puerto Rico rescue law passed last year known as PROMESA.

The island’s initial bankruptcy filing on Wednesday included only its central government, which owes some $18 billion in general obligation, or GO debt, backed by its constitution.

The COFINA filing will pull in another $17 billion or so in debt under the Title III umbrella. Overall the island’s government and various agencies have a debt load of $70 billion that they cannot repay.

The ongoing battle between those two creditor factions, which each believe they are entitled to top priority payment, will be key to any Puerto Rican debt restructuring.

Reporting by Daniel Bases in San Francisco; Additional reporting by Nick Brown in New York; Editing by Sandra Maler