A local judge voided the "Restructuring Law" passed in June 2014. The "Restructuring Law" outlined a "process" for restructuring the debt of Puerto Rican public/private Agencies. 

Since States, Territories, and Municipalities of Territories are not permitted to file for Chapter 9 bankruptcy protection, Puerto Rican Agencies needed a Law to help them resolve future and inevitable short falls. Without a Law, creditors would need to sue in local courts; a long and unproductive process indeed.

The market seems to believe that this news is a positive for Agency creditors and a negative for GO creditors; price action supports this view. 

We have a slightly different take; here are our views on the various credits:

Agency Debt - No Change - Although creditors seemingly have another "option" (to sue in local courts), we do not believe they are any better off. In fact, suing in local courts could result in a worse result than chapter 2.

COFINA Debt - Better - The local judge voided the Restructuring Law because it violated the Takings Clause and the Contracts Clause of the US Constitution. This should help put to rest any fears that the Administration will "claw back" taxes that are contracted to go to COFINA bond holders  and should be a positive for these credits.

GO Debt - No change - We still believe that the Administration will do everything it can to protect the GO debt holders and uphold the Constitutional priority of the debt service.