SAN JUAN, Puerto Rico -- Puerto Rico's Senate approved a bill Thursday that authorizes the U.S. territory to sell up to $3.5 billion in bonds as it prepares to re-enter the market next month with a credit rating downgraded to junk status.
The measure is aimed at helping Puerto Rico pay off $70 billion in current debt and boosting the liquidity of its Government Development Bank, which oversees the island's debt transactions.
U.S. investors are closely watching the measure because it could determine whether they are allowed to sue Puerto Rico in a U.S. court if needed.
The island's House of Representatives recently approved a version that would allow investors to do just that, but the Senate amended the bill to limit such action to courts in Puerto Rico and New York. The revised legislation now goes back to the House for debate.
Senate President Eduardo Bhatia said that the bond issue is meant to keep Puerto Rico current with debt repayment and that the money will not be used to finance new projects.
"This decision was taken because of 30 years of irresponsible actions," he said. "We have been trying to keep the boat afloat and prevent it from sinking."
The island of 3.7 million people is entering its eighth year in recession and is fighting a 15.4 percent unemployment rate, higher than any U.S. state.
Senators who voted against the measure said it would force Puerto Rico deeper into debt and warned that the government will likely not be able to pay the money back.
Puerto Rico recently announced that Barclays, Morgan Stanley and RBC Capital Markets would handle the bond sale planned for March.
The island's bonds have been popular with U.S. investors because they are exempt from federal, state and local taxes, and its debt is held by roughly 70 percent of U.S. municipal mutual funds, according to the investment research firm Morningstar.
Standard & Poor's downgraded Puerto Rico's credit one notch earlier this month, while Moody's Investors Service and Fitch Ratings lowered it by two notches.