Puerto Rico this month started to miss bond payments. That means a legal fight between the government and the large institutions that own its bonds is about to begin.

This legal battle is on top of the hundreds of individual investors in UBS/Puerto Rico bond funds that have already sought legal remedies for their severe losses.

Puerto Rico will soon be awash in litigation. Like the title from the 2007 film starring Daniel Day Lewis about the burgeoning oil business in America 100 years ago, “There will be blood!”

Two large mutual funds holding a boatload of Puerto Rico debt, OppenheimerFunds and Franklin Advisers, in a letter earlier this month to Puerto Rico’s government “demanded” full payment of debt obligations.

The governor of Puerto Rico has repeatedly warned that the debt cannot be paid and has asked Puerto Rico’s allies in the U.S. Congress to pass a law to allow the Island to file a Chapter 11 bankruptcy filing. Existing law does not allow a territory like Puerto Rico, unlike the city of Detroit, to go bankrupt.

“The path that the current administration has chosen will steer Puerto Rico towards litigation and create further deterioration in the capital markets’ trust in Puerto Rico, potentially leading to years of economic turmoil for the people of Puerto Rico,” according to OppenheimerFunds and Franklin Advisers’ letter.

Institutional investors are not the only group in the legal fight over the bonds. The Wall Street Journal reported this week that Mom and Pop investors have begun to score wins over UBS in individual FINRA arbitration cases recovering their losses in UBS/Puerto Rico bond funds.

UBS earlier this week “was ordered to pay about $2.5 million to a San Juan couple who bought Puerto Rico bond funds that plummeted in value as the island commonwealth’s financial crisis deepened,” according to a Journal report by Mike Cherney. That comes months after an earlier $1.5 million award, according to Cherney.

UBS is waist deep in this mess.

“The Swiss bank said it faces more than $1.1 billion in damages tied to its Puerto Rico activities,” Cherney reported. “Roughly 900 cases have already been filed, and lawyers are preparing to file more in the wake of Puerto Rico’s first-ever municipal-bond default this month.”

And the default is only making matters worse for UBS. “More investor losses are likely as the island commonwealth seeks to restructure a debt load that Gov. Alejandro García Padilla has said is unpayable,” Cherney reported.

The legal battle over Puerto Rico’s bonds has been joined. Large institutions and Mom and Pop investors are angry. To be sure, there is more bloodletting on the way.

Zamansky LLC are securities and investment fraud attorneys representing investors in federal and state litigation against financial institutions. For more information about Zamansky LLC, please visit http://www.ubspuertoricofunds.com/.