Puerto Rico missed most of a $ 58 million bond payment Monday, the first default by the U.S. commonwealth in what may become one of the largest restructurings in the history of the $ 3.7 trillion market for debt sold by U.S. state and local governments.
The Government Development Bank for Puerto Rico said the missed payment came after the legislature failed to appropriate money to service the debt. That decision reflects "serious concerns about the Commonwealth's liquidity" and its need to balance paying bondholders with maintaining essential services, according to a news release from the bank. The bank paid about $ 628,000 remaining from a prior balance.
The payment to bondholders is the first skipped since Governor Alejandro Garcia Padilla in June said the island's debts were unsustainable and urged negotiations with creditors in an effort to restructure about $ 72 billion. Still, analysts said it isn't likely to provoke an acute market wide reaction from investors, many of whom have been inching away from the commonwealth for years.
Write to Aaron Kuriloff at AARON.KURILOFF@wsj.com
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