Puerto Rico's Senate has approved a bill to issue up to $3.5 billion in bonds as the U.S. territory prepares to re-enter the market next month with a credit rating downgraded to junk status.

The measure is expected to help Puerto Rico pay off $70 billion in debt and boost the liquidity of its Government Development Bank.

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 that version on Thursday to limit such action to courts in Puerto Rico and New York.

The amended bill now goes back to the House for debate.