Puerto Rico edges back towards default precipice
NEW YORK: Puerto Rico once again is teetering on the brink of default with roughly $1 billion in payments coming due Jan. 1, which could open the door to litigation and even messier debt negotiations with creditors while further damaging the reputation of the debt-laden U.S. territory in the capital markets.
The tiny Caribbean island, suffering from a near decade-long recession with a 45 percent poverty rate and a shrinking tax base due to people leaving the island, first defaulted in August when it failed to make the full payment on its Public Finance Corp bonds.
Governor Alejandro Garcia Padilla has argued that the island’s debt, totaling around $70 billion, is not payable and requires restructuring. Puerto Rico has been negotiating with creditors to try and persuade them to take a reduction.
Puerto Rico’s plight has also gained increasing attention in Washington D.C., where the U.S. Treasury has been pushing Congress to allow the island to restructure its debts under U.S. bankruptcy law. The House is expected to hold a Jan. 5 hearing on Puerto Rico’s financial problems.