Puerto Rico Announces Bond Payment "Moratorium"

Tyler Durden's picture

Having concluded last night that Puerto Rico debt is "unpayable," and that his government could not continue to borrow money to address budget deficits while asking its residents, already struggling with high rates of poverty and crime, to shoulder most of the burden through tax increases and pension cuts, Padilla confirmed tonight that (from Bloomberg):

  • *PUERTO RICO TO SEEK "NEGOTIATED MORATORIUM", 'YEARS' OF POSTPONEMENT IN DEBT PAYMENTS

Likening his state's situation to that of Detroit and New York City (though not Greece), Padilla concluded, the economic situation is "extremely difficult," which is odd because just a few years ago when they issued that bond - everything was awesome?

When will PR overtake Greece again?

 

Puerto Rico's Governor is speaking on national TV:

  • *PUERTO RICO DEBT IS UNPAYABLE, GOVERNOR SAYS
  • *PUERTO RICO DEBT LOAD WON'T LET ISLAND OVERCOME RECESSION: GOV.
  • *PUERTO RICO GOV. SAYS HE DOESN'T AGREE W/ ALL OF KRUEGER REPORT
  • *PUERTO RICO GOVERNOR SEEKS CREATION OF FISCAL BOARD
  • *PUERTO RICO NEEDS COMPLETE RESTRUCTURING PLAN: GOVERNOR
  • *PUERTO RICO TO SEEK `NEGOTIATED MORATORIUM' W/ BOND HOLDERS
  • *PUERTO RICO MUST HAVE BETTER TERMS TO PAY DEBT: GOVERNOR
  • *PUERTO RICO SEEKS ACCORD ON FISCAL REFORMS BY AUG. 30

And the punchline:

  • *BONDHOLDERS SHARE RESPONSIBILITY FOR PUERTO RICO'S DEBT: GOV.
  • *PUERTO RICO TO SEEK `NEGOTIATED MORATORIUM' W/ BOND HOLDERS
  • *PUERTO RICO BONDHOLDERS MUST MAKE SACRIFICES TOO: GOVERNOR
  • *PUERTO RICO TO SEEK `YEARS' OF POSTPONEMENT IN DEBT PAYMENTS

We suspect the 70 handle will quickly become a 50 handle or less...

As AP reports,

Puerto Rico's governor says he will create a financial team that will meet with bondholders and seek a moratorium on debt payments.

 

Gov. Alejandro Garcia Padilla made the announcement Monday night after saying that the U.S. territory's $72 billion public debt is unpayable. He said he would seek a moratorium of several years but did not provide specifics.

 

Garcia's comments come just hours after international economists released a gloomy report on Puerto Rico's economy.

 

Legislators are still debating a $9.8 billion budget that calls for $674 million in cuts and sets aside $1.5 billion to help pay off the debt. The budget has to be approved by Tuesday.

As we explained previously,

What happens next is unclear: "Puerto Rico, as a commonwealth, does not have the option of bankruptcy. A default on its debts would most likely leave the island, its creditors and its residents in a legal and financial limbo that, like the debt crisis in Greece, could take years to sort out."

So without the "luxury" of default, what is PR to do? Why petition to be allowed to file Chapter 9 naturally: after all everyone is doing it.

In Washington, the García Padilla administration has been pushing for a bill that would allow the island’s public corporations, like its electrical power authority and water agency, to declare bankruptcy. Of Puerto Rico’s $72 billion in bonds, roughly $25 billion were issued by the public corporations.

 

Some officials and advisers say Congress needs to go further and permit Puerto Rico’s central government to file for bankruptcy — or risk chaos.

 

“There are way too many creditors and way too many kinds of debt,” Mr. Rhodes said in an interview. “They need Chapter 9 for the whole commonwealth.”

García Padilla said that his government could not continue to borrow money to address budget deficits while asking its residents, already struggling with high rates of poverty and crime, to shoulder most of the burden through tax increases and pension cuts. Where have we heard that before...

He said creditors must now “share the sacrifices” that he has imposed on the island’s residents.

 

“If they don’t come to the table, it will be bad for them,” said Mr. García Padilla, who plans to speak about the fiscal crisis in a televised address to Puerto Rico residents on Monday evening. “What will happen is that our economy will get into a worse situation and we’ll have less money to pay them. They will be shooting themselves in the foot.”

And the punchline:

“My administration is doing everything not to default,” Mr. García Padilla said. “But we have to make the economy grow,” he added. “If not, we will be in a death spiral.”

And this one: any deal with hedge funds, who are desperate to inject more capital in PR so they can avoid writing down their bond exposure in case of a default, "would only postpone Puerto Rico’s inevitable reckoning. “It will kick the can,” Mr. García Padilla said. “I am not kicking the can.”

We wonder how long before Tsipras, who earlier was quoting FDR, steals this line too.

And speaking of Prexit, how long before Puerto Rico exits the Dollarzone... and will there be a Preferendum first or will the governor, in his can kick-less stampede, just make a unilateral decision to join Greece, Ukraine, Venezuela and countless other soon to be broke countries in the twilight zone of Keynesian sovereign failures?

*  *  *

But Puerto Rico is not Detroit... well actually it is... worse:

  • *PUERTO RICO FACES SIMILIAR SITUATION AS DETROIT, NYC: GOVERNOR

Puerto Rico's debt is nearly half that of California for a population one-tenth the size... (via WSJ)

 

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davidalan1's picture

whooooaaaa oh Domino"- Van Morrrison

Looney's picture

Victoria Nuland should bring some of her cookies to PR’s Maidan ;-)

Speaking of the devil…

 

Stratfor has an interesting video about our misleading portrayal of Russia.

Usually, their analysis is very Nuland-esque, but this one is refreshingly different.

Looney

http://blip.tv/stratfor/conversation-the-u-s-media-s-misleading-portraya...

CrazyCooter's picture

Is it really gonna hit the fan this time? I mean, I expected it for so many years I am kind of numb now ...

Regards,

Cooter

Looney's picture

There ain’t no fan, CC. It’s a myth!

There’s a huge barrel of shit and a HUGE sledgehammer right above it ready to come down ;-)

Looney

cossack55's picture

PR to Putin Pivot.  Iskanders in the Carib. Awesome.

kaiserhoff's picture

That disturbance in the force you just felt,

  was a few hundred bond funds, biting the dust.

nmewn's picture

Joor veemin, geev us joor veemin!...lol.

knukles's picture

Shades of NYC in the 70's!
It's not a default, it's a moron-a-torium

two hoots's picture

Puerto Rich 2016 Presidential Campaign Pledge:  " Will Vote for Debt Relief (and a little kickback)"

knukles's picture

I did some biz in PR for one of the firms for which I worked and it was not too soon into the shimmy shimmy shake shake that it became clear as a bell in no uncertain terms that there was going to have to be some greasing of skids.  We departed.  Uh uh, no way "Jose"

BTW when you fly in or out and the plane is loaded with PRs, they do a cheer and trow their hands up in the air like a "wave" upon landings.  A little strange.

tc06rtw's picture

 … can’t they just get some

BETTER LIARS
      to tell
BETTER LIES ?

knukles's picture

One of the local stock brokerages in San Juan that we drove past on it's sign said "Member SIPC". 
I said to my business associate;  "Look. They can't even spell Spic right"
Your Zen for the Day

Colonel Klink's picture

Just call Gollum Sachs, they're the expert at lies and graft.

Philo Beddoe's picture

They will reverse the direction of the fan blades. This will allow one to know where the shit will end up. 

two hoots's picture

NY Federal Reserve:

 

At the Federal Reserve Bank of New York (popularly known as the New York Fed), we are proud that Puerto Rico is part of the Second District, which we represent in the Federal Reserve System. We are deeply committed to the people of the Island and to its growth and prosperity.

 

Good Job Mr Dudley of keeping us in the dark about this.  Or did you not know?   If not, why?  Just what the fuck do you guys do up there, think of how you can strip the USA and it's common citizens of  its wealth?

The Federal Reseve is either criminal or incompetent.

thamnosma's picture

They absolutely knew.  The situation in Puerto Rico has been circulating for a couple of years at least.  The debt has been an issue in their local elections.  Now it's hitting the fan is all.  Apparently this is "no more kicking the can down the road" week.  The Fed couldn't help but know.

Dewey Cheatum Howe's picture

It is either fully criminal or fully incompetent or it is partly criminal and partly incompetent.

The propaganda matrix, which they are a smut peddler subset of doesn't run on or so I'll take and for 5 cents.

It is so incompetent it tries to be fully criminal and fully incompetent at the same time. This is why the whole matrix collapses because the geniuses who set it up couldn't get their relationships right. A logical contradiction is a lie not truth so everything derives from a lie.

Lowering confederate flags (by a black which implies lack of color or signal etc) and raising rainbow flags (by a black/white which implies lack of color or signal and full color or signal) at the same time for an example.

Like I explained before the money for nothing mentality behind finance and central banks comes for the lie you are taught in school that 1 + 1 = 2.

It can't because the area of any shape can never be more than 1. So it really is 1 = 1/2 + 1/2 or 1 = 1/3 + 1/3 + 1/3 etc. The only way 1 + 1 can equal 2 is if we are talking about 2 equal shapes and sets like 2 squares with an area of 1.

See how the lie works yet. They muddy the deflation with inflation, i.e. infinite growth smaller within a set as infinite growth larger than 1 in the same set. {1 + 1 = 2} instead of 1*{1/2 + 1/2} 1*{1/2 + 1/2} = 2*{1/2 + 1/2}, money for nothing and your chicks for free. Then they wonder why they their models don't work.

autofixer's picture

The Hellenic Republic is the "shiny object."  Is [Not so] Rich Port the "Black Swan?"

Winston Churchill's picture

More of a "black albatros" at this point.

knukles's picture

Never ever tell a Puerto Rican window washer that you want them spic and span

onewayticket2's picture

coming to a Student Loan near you....in exchange for your continued votes, election after election, that is.....

 

best, 

hillary

Kaiser Sousa's picture

im sure this should send the phony paper prices of Gold and Silver soaring tomorrow just like Greece's new flow did today.....

disabledvet's picture

Hot dogs for sale! Get 'Em while their hot!

Hot dogs for sale!

Normalcy Bias's picture

Why does the US hold on to this turd? It's a bottomless pit the govt throws money into, and what do they get in return?

Normalcy Bias's picture

Hell, the Rican Separatists were trying to do us a favor in the 70's, ...until they started blowing shit up.

Usurious's picture
Usurious (not verified) MsCreant Jun 29, 2015 5:55 PM

 

 

 

http://empire.is/

 

seek's picture

Kyle Bass called this what, a year ago? Two years ago? PR is done. So is Greece, and Japan ain't looking too good.

Maybe this really is the start of the final act? We can only hope.

disabledvet's picture

Nickel or tin...don't know which...got fucking clubbed today. I'll have to look it up...

piratepiet2's picture

Japan is in a whole other league I guess.  Don 't forget Japan is still the third (!) national economy in the world.

espirit's picture

Would you really like to wager on a radioactive Wantanabe?

divedivedive's picture

Apparently there are some real tax advantages to living in Puerto Rico.

http://www.forbes.com/sites/robertwood/2014/07/04/hate-taxes-move-to-tax...

 

Infinite QE's picture

Is Jade Helm be re-routed south now?

falconflight's picture

The biggest difference between PR and Haiti maaan, is the white Federal TaxPayer, maaan.  Colonial shame that we will pay for again and again.  FU PR

CHC's picture
CHC (not verified) Jun 29, 2015 5:44 PM

Just tell me when I can stop paying my bills for an indeterminate amount of time. 

Winston Churchill's picture

Any time you like, and you'll get to meet all sorts of

interesting people,lawyers, bailiffs and the like.

wee-weed up's picture

And then you'll get to meet Big Bubba...

Your cell-mate. (Don't drop the soap!)

Fukushima Fricassee's picture
Fukushima Fricassee (not verified) Jun 29, 2015 5:44 PM

Bullish !