Aug 06, 2015 (LBO) – One of the unincorporated territories of the United States, Puerto Rico, is to default another bond payment due on September 01 after the government defaulted its first bond payment in their history on Monday.
The second default is a payment of 92 million US dollars a month into a general obligation bond that is used to make payments on 13 billion US dollar bond.
Foreign media reported that 370 million US dollars of the general obligation bond comes due by 01 January 2016.
Following the default of its first 58 million US dollars bond payment due on August 01, the government said it reflects obligations to Puerto Ricans to ensure the essential services they deserve are maintained.
“We did make a partial payment of interest in respect of its outstanding bonds,” the government said in a special statement.
In accordance with the terms of the first bond, the obligations are payable solely from funds appropriated by the Legislature and it is not legally bound to appropriate the funds for bond payment.
Majority of Puerto Rican bondholders are US hedge funds and other US investors who invested with a thought that Puerto Rico may not default their debt because its constitution requires the government to prioritize on debt payments.
In that context the government may have to amend their constitution to continue its essential services to citizens and a working group has also established by the government to restructure their entire debt.
Meanwhile a bill providing a limited access to bankruptcy court is currently before US congress though a little progress has been made so far.
Puerto Rico owes about 72 billion US dollars in debt and the economy is in a recession from 2006.
It escalated with the 2008 global financial crisis, widening the unemployment to 14 percent and putting nearly a half of Puerto Ricans to poverty.