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U.S. Senate passes relief bill to restructure Puerto Rico's debt

By Andrew V. Pestano
The U.S. Senate on Wednesday passed a bill that will restructure Puerto Rico's $70 billion of debt. If the bill did not pass, Puerto Rico was expected to default yet again, the commonwealth's creditors would have continued suing for full repayment of debts, and essential public services -- such as education, transportation, public safety and sanitation -- would have continued to suffer. File Photo by Kevin Dietsch/UPI
The U.S. Senate on Wednesday passed a bill that will restructure Puerto Rico's $70 billion of debt. If the bill did not pass, Puerto Rico was expected to default yet again, the commonwealth's creditors would have continued suing for full repayment of debts, and essential public services -- such as education, transportation, public safety and sanitation -- would have continued to suffer. File Photo by Kevin Dietsch/UPI | License Photo

WASHINGTON, June 29 (UPI) -- The U.S Senate on Wednesday passed a bill that would restructure Puerto Rico's $70 billion of debt and set up recovery conditions days before the commonwealth is expected to default on a $2 billion payment.

President Barack Obama is expected to sign the bill before Puerto Rico's $2 billion debt repayment due Friday. The bill passed the House of Representatives earlier this month.

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"Failure is really not an option," Senate Majority Leader Mitch McConnell, R-Ky., previously said of the vote on Tuesday.

The bill passed with a 68-32 vote. If the bill did not pass, Puerto Rico was expected to default yet again, the commonwealth's creditors would have continued suing for full repayment of debts, and essential public services -- such as education, transportation, public safety and sanitation -- would have continued to suffer.

RELATED Supreme Court: Puerto Rico can't restructure debt

Under the bill, a seven-member board to oversee Puerto Rico's finances would be established. The bill's primary goal is to reduce Puerto Rico's debt burden, which currently absorbs about a third of its revenues. It is not yet immediately known how the matter of the $2 billion debt repayment or other financial issues would be resolved after Obama signs the bill into law.

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Congress has been at odds over helping Puerto Rico get out of massive debt. Puerto Rico cannot afford to pay debts and has no legal power to declare bankruptcy. Puerto Rico Gov. Alejandro Garcia Padilla has previously urged for Congress to take action.

The commonwealth long-hoped Congress would allow it to restructure its debts. More ambitiously, Puerto Rico hoped to be granted the ability to declare Chapter 9 bankruptcy -- an unlikely scenario, as the U.S. Supreme Court ruled against it and as those who gave loans to Puerto Rico did so knowing bankruptcy was not an option.

About 45 percent of Puerto Ricans live in poverty, where the median household income is $19,000. Treasury Secretary Jack Lew on Tuesday previously said the bill's failure would mean a descent into "chaos."

"If anyone was writing this bill on their own, they might do it different than the way it was produced," Lew said. "But it's a compromise, and most importantly, it works. The risks of Puerto Rico descending into chaos are very real, and the alternative is action. It is a choice between something that works and something that would just be a terrible ordeal for the 3.5 million Americans who are Puerto Rican citizens and American citizens."

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