(Bloomberg) Hedge funds holding Puerto Rico’s general-obligation bonds are asking a court to stop the commonwealth from directing sales-tax revenue to repay other debt backed by that money because it violates the island’s constitution.
It is the first legal action for the U.S. territory that pits general-obligation bondholders against investors of sales-tax debt. Puerto Rico’s constitution states its general obligations must be repaid before other expenses. A portion of the island’s sales-tax revenue is dedicated to repaying bonds, called Cofinas by their Spanish acronym.
