A Puerto Rican flag flies above empty pairs of shoes outside the Capitol building in this aerial photograph taken during a protest against the government's reporting of the death toll from Hurricane Maria in San Juan, Puerto Rico, on Friday, June 1, 2018.

A U.S. federal judge on Monday approved a plan to restructure $17 billion of debt from Puerto Rico's Sales Tax Financing Corporation, known as COFINA, marking the second deal between the bankrupt U.S commonwealth and its creditors to win court approval.

Judge Laura Taylor Swain, who is hearing Puerto Rico's bankruptcy case filed in May 2017, called the COFINA plan "a significant step on the path towards Puerto Rico's financial recovery, economic stability, and prosperity."

The island, which is trying to restructure about $120 billion of debt and pension liabilities, won court approval in November for a consensual deal with creditors over about $4 billion of debt related to its Government Development Bank (GDB).

According to Puerto Rico's federally created oversight board, the COFINA plan will slash debt service on the sales tax-backed debt by $17.5 billion over nearly 40 years, saving the island an average $456 million annually.

Future sales tax revenue previously pledged exclusively to COFINA will be split, with 53 percent going to COFINA bondholders and 46 percent flowing to the commonwealth government.

"Court approval of the COFINA plan of adjustment is an important milestone for Puerto Rico because putting the restructuring behind us is key to the island's future," said Oversight Board Chairman José Carrión in a statement.

The COFINA ruling followed a two-day hearing on the matter in mid-January. Opposition to the plan came mainly from labor unions, which alleged it was not in the best interest of Puerto Rico, will drive away resources from essential public services and is not economically sustainable in the long term.

Owners of more than $14.5 billion of COFINA bonds, meanwhile, voted in support of the plan of adjustment.

In her order, Swain acknowledged the objections, including the lack of a comprehensive debt audit. The judge also noted that the island's core government debt, which includes roughly $13 billion of general obligation bonds and almost $50 billion in unfunded pension liabilities, must still be addressed.

The board has raised the possibility that an adjustment plan could be imposed on creditors in a process known as a cramdown. It also asked the court last month to invalidate more than $6 billion of the GO debt.