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Komfie Manalo, Opalesque Asia:

A group of hedge funds have filed a lawsuit against Puerto Rico and accused the commonwealth of illegally using an emergency fiscal-crisis law to avoid payments on $3.5bn in bonds that are guaranteed under its constitution, reported Bloomberg.

The hedge funds said in their lawsuit filed in Manhattan federal court that Puerto Rico cannot apply the Emergency Moratorium and Financial Rehabilitation Act, which was signed into law in April this year, to the general-obligation bonds.

Mark Stancil, an attorney representing the bondholders, said in a statement, "Governor Alejandro Garcia Padilla has flouted centuries-old federal constitutional protections for contract and property rights."

However, Padilla’s chief of staff Grace Santana said in a separate statement that the decision of the hedge funds to file a lawsuit in New York instead of opting to dialog with the island, "demonstrates their continued refusal to acknowledge the reality of the commonwealth’s fiscal crisis." She also criticized the lawsuit and described it as an attempt "to disrupt the commonwealth’s ability to keep the lights on and provide essential services."

Santa also admitted that Puerto Rico could not pay all its debt.

Puerto Rico owes its creditors more than $70bn, more than any U.S. states except California and New Yor......................

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