Puerto Rico’s fiscal agent has hired another well-known restructuring law firm, raising the specter that the financially troubled island is preparing to revamp its finances.
The Government Development Bank for Puerto Rico, which oversees all of the commonwealth’s debt deals, said it had hired Cleary Gottlieb Steen & Hamilton.
The development bank declined to say whether Cleary had been hired as part of an effort to restructure the commonwealth’s debt.
“The G.D.B. regularly solicits advice and counsel from a number of legal and financial advisers with respect to financing plans and other related matters,†a spokesman for the development bank said in a statement. “Cleary Gottlieb Steen & Hamilton were engaged by the G.D.B. as part of these ongoing efforts.â€
The hiring of Cleary, which was first reported by The Wall Street Journal, comes as Puerto Rico tries to jump-start a flagging economy while also digging out from a mountain of municipal bond debt.
Cleary has represented many financially challenged government clients, including Greece, Iraq, Iceland and Argentina.
Puerto Rico investors worry that a restructuring could result in large losses on their bond holdings as the government seeks to reduce its debt load. Unlike Detroit and other United States municipalities, Puerto Rico cannot file for federal bankruptcy protection, making the prospect of a restructuring by the commonwealth potentially even more frightening to creditors because there is no clear template.
Last month, the Government Development Bank disclosed soon before it sold $3.5 billion in municipal bonds that it had hired Millco Advisers, an affiliate of Millstein & Company, which is also well known for its restructuring work.
Millco’s founder, James Millstein, was the architect of a complicated series of transactions that paid back the Federal Reserve Bank of New York for its initial bailout loans to the American International Group.
