The first hearing of the Puerto Rico Title III case on Wednesday reinforced expectations that the battle between general obligation and Puerto Rico Sales Tax Financing Corp. (COFINA) bondholders will be a central issue as the biggest municipal restructuring gets underway.

“The issue of how to treat GO versus COFINA bondholders is one of the key decisions that the Title III process will need to resolve,” said AllianceBernstein director of municipal credit research Joseph Rosenblum. “And it is likely to have a significant impact on other classes of debt.”

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