Governor Says Puerto Rico will Default on Almost $174M Debt

by San Antonio Attorney

Alejandro Garcia Padilla, Governor of Puerto Rico, revealed that the island will default on nearly 174 million in both principal and interest payments on debt.

This came six months after Padilla made an announcement that the country was going bankrupt and they are unable to generate $72 billion in bond payments.  Puerto Rico, under a United States Commonwealth, has no definite pathway to resolve this deficiency.

Since Puerto Rico’s form of government is Commonwealth and not a municipality, it will not be eligible for Chapter 9 Bankruptcy filing.

Taylor Foy, official spokesman for Iowa Senator Chuck Grassley, stated that neither Chapter 9 nor even Super Chapter 9, another alternative pathway for filing can resolve Puerto Rico’s spending problems.

The United States Central Bank does not have the power to render aid to Puerto Rico since their economy has been marred by years of population surge, slow economic growth and uneven government spending, according to Janet Yellen, Federal Reserve Chief.

The only option Puerto Rico can have is to compromise with Wall Street firms that are recording their debt.  Municipal bond fund managers are drawn to the bonds of Puerto Rico since they do not have federal taxes.

Franklin Templeton and Oppenheimer Funds are two firms that possess $5 billion Puerto Rican bonds.  San Juan bond holders are hedge funds Stone Lion Capital Partners and Knighthead Capital Management.

The firms will not write out the country’s debt but will only make it lesser.  Puerto Rico and their creditors have come to a mutual agreement which will allow the island to avoid default.

The only advantage of the island’s financial crisis is how they have managed to pay off some debts on the first day of 2016.  This resulted in defaulting on only two over thirteen payments of debts as 2016 commenced.

Leave a Comment

Previous post:

Next post: