Puerto Rico Defaults on $58M Debt Payment
- VOA News,August 4, 2015
The government of Puerto Rico has confirmed that it failed to make a $58 million debt payment that was due Saturday, a move that amounted to a default for the first time in its 117 years as a United States possession.
Puerto Rican officials had warned on Friday that they would not make the payment because the island legislature failed to appropriate the funds, but they argued it should not be considered a default.
But Moody's Investor Service said Monday the missed payment was the first in what it believes will be broad defaults on commonwealth debt.
The territory did make a payment on the interest of about $628,000, saying it lacked the funds to pay the amount in full.
Puerto Rico Governor Alejandro Garcia Padilla shocked investors in June when he said the island's debt, totaling $72 billion, was unpayable and required restructuring. This includes debts, owed not just by the central government, but also those of public corporations, like utility companies, and cities.
Puerto Rico is the third largest issuer of state and local debt in the United States, behind only California and New York.
Much of the island's debt is held by individual U.S. investors in hedge funds, mutual funds or other investment accounts raising questions about how the U.S. economy might be affected now that Puerto Rico has fallen behind on its debt payments.