The U.S. Supreme Court declined Monday to review a controversial ruling that some special revenue bonds do not have to be paid while Puerto Rico goes through bankruptcy.
The justices declined without comment to hear a U.S. District Court decision upheld by the 1st U.S. Circuit Court of Appeals in Boston that payments on special revenue bonds issued by the Puerto Rico Highway Transportation Authority were permitted, but not required.
Fiscal recovery plans issued after the bonds by a federal oversight board diverted some of those payments, prompting the legal challenges by bond insurance companies Assured Guaranty Corp. and Ambac Assurance Corp.
The bonds were legally secured by a gross lien on revenues derived from certain highway tolls and excise taxes, and the insurers were on the hook for covering the defaults.
In March and April 2017, the Commonwealth and PRHTA each adopted fiscal plans modifying the application of the special revenues and diverting some to the commonwealth for general revenue purposes.
The insurers are also involved in legal challenges in the same circuit over the constitutionality of the oversight board.
In October, the Supreme Court heard arguments on the fate of the federal oversight board and the status of plans already made to reduce bondholder claims and restructure public pension benefits. A decision is expected by summer.