Puerto Rico Judge Questions Legal Foundation of Sales Tax Deal

Supporters of Puerto Rico’s biggest debt restructuring plan must justify the sweeping legal protections they want for new bonds to be issued under the proposal, the judge overseeing the island’s bankruptcy said.

In a court order issued late Tuesday night, U.S. District Court Judge Laura Taylor Swain gave government officials and bondholders until Wednesday evening to detail legal technicalities behind the proposal to restructure more than $17 billion in sales-tax bonds, known as Cofinas.

Once additional court papers are filed, Swain will have everything she needs to decide whether to approve the plan.

During a court hearing last week, Swain ...