Puerto Rico bankruptcy judge forbids disaster funds for credit repayment

NEW YORK (Reuters) - U.S. District Judge Laura Taylor Swain granted a motion on Wednesday that forbids Puerto Rico from using disaster relief money to repay creditors who are owed roughly $72 billion in debt repayments.

The motion, filed by the government of Puerto Rico earlier this month, sought to ensure the money distributed by the Federal Emergency Management Agency in the wake of Hurricane Maria would be reserved for cleanup.

Swain granted the motion from the bench during a hearing in New York on Wednesday, according to court documents.

FEMA funds will be used “solely for their intended and required purposes, will be deposited into segregated and non-commingled accounts, and will not be subject to any existing creditor or third-party claims,” the motion said.

The storm hit on Sept. 20, causing billions in damage, and cut power to the entire island, leaving its 3.4 million U.S. citizens in the dark. As of Monday, just 18 percent of the island had electrical power, according to U.S. Department of Energy data. Prior to the storm, the island had been suffering through a decade-long recession, a 45 percent poverty rate and rapidly increasing emigration to the U.S. mainland.

Reporting by Daniel Bases and Nick Brown; Editing by Richard Chang