Puerto Rico's governor on Wednesday announced a historic restructuring of a portion of the U.S. territory's $70 billion debt through courts after negotiations with bondholders failed. The announcement marks the biggest bankruptcy-type process ever for the U.S. municipal bond market.

Gov. Ricardo Rossello said that a federal control board overseeing the island's finances agreed with his request late Tuesday to put certain debts before a court.

"We're going to protect our people," he said hours after the U.S. territory was hit with multiple lawsuits from creditors seeking to recuperate the millions of dollars they invested in bonds issued by Puerto Rico's government, which has declared several defaults amid a 10-year recession.

Rossello said one of the lawsuits sought to claim all revenues generated by the island's Treasury Department for bondholders.

"I'm not going to allow that to happen," he said.

A federal district court judge will now be in charge of determining how Puerto Rico's debt will be restructured. Bondholders cannot challenge Rossello's decision until 120 days from now. Meanwhile, the process to restructure the debt in court will continue, said Elias Sanchez, the governor's representative to the board.

He noted that unlike a regular bankruptcy on the U.S. mainland, a judge cannot unilaterally seize any of Puerto Rico's assets without prior authorization from the federal control board.

It is too early to say what kind of impact a debt restructuring in court will have on the island of 3.4 million people, economist Jose Joaquin Villamil told The Associated Press.

"(It) presents a very big risk for both parties," he said, referring to the government and to bondholders. "We don't know what a federal district court judge is going to decide."

However, he warned that the process will further spook the type of investors that Puerto Rico's economy needs as it prepares to implement several austerity measures.