Well, these firms lent to Puerto Rico knowing that the likelihood of being paid back was more and more unlikely with each passing year.
If there is a sort of ‘jubilee’...then Puerto Rico’s credit rating needs to be downgraded to worse than junk, so nobody will get any ideas about lending to them for the foreseeable future. That island will have to make due without credit.
As for the lenders? They will have to eat the debt. And they will absolutely deserve it, because they apparently didn’t care about PR’s ability (or willingness!) to repay.
Exactly right. But if they're smart, the debt-holders will work out deal -- restructure the debt on more favorable terms for PR. Creditors take a big haircut, but not a total loss.
In return, PR would accept a severe austerity program, with massive cuts in government spending and a complete overhaul of the PR pension system, to include massive cuts in pension payouts -- even to current government pensioners (they won't starve; those public-sector pensions are generous).