WSJcomBankruptcyBeat

Congress begins considering legislation Wednesday that addresses Puerto Rico’s debt crisis. Here’s a look at seven frequently asked questions:

How did Puerto Rico end up with so much debt?

The island’s economy has been in recession since 2006, and Puerto Rico’s government borrowed aggressively to balance its budget. It has around $70 billion in debt, up from $24 billion in 2000. To skirt debt-sustainability requirements, it devised new bond issues with competing security pledges.

One of the most contentious parts of bankruptcy is determining the value of the company filing for chapter 11. In fact, the valuation process was a major focus of the American Bankruptcy Institute’s Commission to Study the Reform of Chapter 11, and many of the commission’s proposals were based on the perception that bankruptcy valuations are systematically skewed toward undervaluing debtors.

Tim Hassenger and Drew McManigle have joined advisory firm SierraConstellation Partners to help expand the firm’s presence in Texas. Mr. Hassenger, a partner in the Dallas office, has experience in studying turnaround trends and has advised on restructurings and legal issues.

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