Puerto Rico de­faults on bond pay­ment: Moody's

The Pak Banker - - BUSINESS -

The US ter­ri­tory of Puerto Rico, deep in eco­nomic cri­sis, has de­faulted on part of its $73-bil­lion debt by miss­ing a bond pay­ment due on Mon­day, rat­ing firm Moody's said.

"Bond­hold­ers to­day did not re­ceive full and timely pay­ment of debt ser­vice due Au­gust 1 on bonds is­sued by the Puerto Rico Public Fi­nance Cor­po­ra­tion," said Emily Raimes, vice pres­i­dent at Moody's In­vestors Ser­vice, in a state­ment. "Moody's views this event as a de­fault," she added.

Dubbed the "Greece

of

the Caribbean," the US is­land was sup­posed to pay about $58 mil­lion in in­ter­est and prin­ci­pal on the PFC se­cu­ri­ties, but only made a par­tial pay­ment on the in­ter­est.

"This is a first in what we be­lieve will be broad de­faults on com­mon­wealth debt," the Moody's vice pres­i­dent said. She added that the de­fault shows "Puerto Rico does not have the re­sources to make all of its forth­com­ing debt pay­ments."

Ear­lier Mon­day, the Gov­ern­ment De­vel­op­ment Bank for Puerto Rico an­nounced that the full pay­ment was not made "due to the lack of ap­pro­pri- ated funds for this fis­cal year."

The GDB pres­i­dent, Melba Acosta Febo, said the par­tial pay­ment was made from funds re­main­ing from pre­vi­ous leg­isla­tive ap­pro­pri­a­tions, not­ing that the bonds are payable only by specif­i­cally ap­pro­pri­ated funds.

PFC ap­plied those funds, about $628,000, to the in­ter­est of the pay­ment due Mon­day, she said in a sep­a­rate state­ment.

"This was a de­ci­sion that re­flects the se­ri­ous con­cerns about the Com­mon­wealth's liq­uid­ity in com­bi­na­tion with the bal­ance of obli­ga­tions to our cred­i­tors and the equally im­por­tant obli­ga­tions to the peo­ple of Puerto Rico to en­sure the es­sen­tial ser­vices they de­serve are main­tained," she said.

Moody's noted that since the pay­ment on those bonds is sub­ject to ap­pro­pri­a­tion, "the lack of ap­pro­pri­a­tion means there is not a le­gal re­quire­ment to pay the debt, nor any le­gal re­course for bond­hold­ers." The Caribbean is­land of 3.5 mil­lion peo­ple has seen its econ­omy con­tract for seven years. In June, Gover­nor Ale­jan­dro Gar­cia Padilla said the is­land would seek to resched­ule its debt with cred­i­tors in hopes of avoid­ing a de­fault.

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