Oversight board says $6B of Puerto Rico debt should be voided

Jan. 15 (UPI) -- More than $6 billion in debt issued by Puerto Rico could be wiped clean and leave investors with the bill, a U.S. oversight board says.

The Financial Oversight and Management Board for Puerto Rico, created to manage the U.S. territory's government debt crisis, said the invalid debt was issued in "clear violation" of the Puerto Rico constitution, which requires a balanced budget.

The board said, therefore, the debt should be considered null and void. The debt was used to balance the budget while the proceeds were used to finance deficit spending.

The debt includes all general obligation bonds issued between 2012 and 2014, the board said in a statement on Twitter.

The oversight board said it will recommend to the judge overseeing Puerto Rico's restructuring case to wipe out issues that exceed the constitutional debt limit. That means creditors won't get their investment back.

"The Board has the duty to act in the best interests of Puerto Rico and all of its creditors. Challenging improperly issued debt is consistent with that duty," the board wrote. "Today's objection is the first major action taken by the Oversight Board as a result of its careful and exhaustive investigation."

Puerto Rico is still grappling with rebuilding efforts from Hurricane Maria, which caused substantial damage in September 2017.