SAN JUAN, Puerto Rico – Holders of bonds from Puerto Rico’s Government Development Bank have sued to challenge parts of a debt-moratorium law that officials say is crucial to maintaining essential services as it struggles under a nearly $70 billion debt load.
The lawsuit filed late Friday in the U.S. District Court in San Juan names Puerto Rico’s governor and treasury secretary and a receiver for the bank.
The bondholder group behind the challenge argues that amendments to the law prioritize the rights of certain creditors at the expense of others in violation of U.S. and Puerto Rican law.
The bank defaulted on the bulk of a $423 million payment due May 1.
Puerto Rico government entities are barred from using federal bankruptcy laws, and a local bankruptcy law was struck down as unconstitutional.