NEW YORK, May 6 (Reuters) - A group of hedge funds that hold Puerto Rico’s government debt plans to hire a litigation law firm as a financing deal that could help save the U.S. territory from a potential default looks increasingly remote.
The Ad Hoc group of hedge funds, which holds $4.5 billion of Puerto Rico’s debt, is planning to hire Robbins, Russell, Englert, Orseck, Untereiner & Sauber LLP, a Washington D.C.-based firm that describes itself as a high stakes litigation boutique, a spokesman for the hedge funds said Tuesday.
The move is an indication of the increasingly uncertain situation Puerto Rico’s creditors are facing as attempts to overhaul the tax system and produce a balanced budget are stalled in the island’s gridlocked legislature.
Puerto Rico is currently in negotiations with the hedge funds over providing up to $2.95 billion in transitional financing in return for tax reforms and other measures.
But the recent defeat of a tax overhaul package in Puerto Rico’s House of Representatives and delays in preparing the budget have cast doubt over the viability of the deal.
Puerto Rico officials have said that without a financing deal it will have to shut down the government on June 30.
“The group remains committed to working with the commonwealth to provide financing that can bridge Puerto Rico to a balanced budget and growing economy,” Russell Grote, a spokesman for the group on said on Tuesday.
“Given the lack of progress thus far to achieve this objective, we are simply preparing for all potential outcomes.”
The group of 34 hedge funds includes Fir Tree Partners, Brigade Capital Management, Monarch, Stone Lion, Davidson Kempner, and Centerbridge. (Reporting by Edward Krudy; Editing by Kim Coghill)