Bankruptcy law for Puerto Rico counterproductive: insurers association

NEW YORK (Reuters) - The Association of Financial Guaranty Insurers (AFGI) said on Friday that granting bankruptcy protections to the government of Puerto Rico, which is struggling to pay its debts, would jeopardize its ability to reach a consensual debt restructuring.

In a letter to U.S. House of Representatives Speaker Paul Ryan, the association said it applauded U.S. Treasury Secretary Jack Lew's urging legislation outlining strong financial oversight for the Commonwealth to implement fiscal and economic reforms.

While pointing out that Lew did not explicitly join Puerto Rico's call for bankruptcy protection, AFGI said: "We remain concerned with any federal legislation that would authorize, or incentivize Puerto Rico to pursue nonconsensual restructuring of bonds issued by Puerto Rico or its public corporations."

Lew was in Puerto Rico on Wednesday to meet with the island's governor, Alejandro Garcia Padilla, as well as business and labor leaders. He again urged the U.S. Congress to pass legislation by the end of March to help the island handle its roughly $70 billion debt load.

Puerto Rico has begun to default on some of its bond issues and is negotiating with creditors to restructure its borrowings, but is facing a lawsuit from bond insurers who backed its debt.

(Reporting By Daniel Bases and Megan Davies; Editing by Nick Zieminski)