Puerto Rico Bonds Are Collapsing

Tyler Durden's picture

With all eyes focused on Greek ATM lines, collapsing Chinese ponzi schemes, and European bank implosions, one could be forgiven for forgetting about another crisis occurring closer to home. As we detailed here, Puerto Rico is now "in a death spiral" and PR bonds are collapsing this morning...



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


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?

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ZippyBananaPants's picture

I started reading ZERO several years ago.


Times like this I am glad you guys do what you do.



two hoots's picture

How could the Fed have seen Puerto Rico coming???


From the NY FED:


"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."


They are lying or incompetent.  No wonder they won’t turn over documents to Congress

SuperVinci's picture

uhh ohh, does this mean Puerto Rexit is next?

junction's picture

I think we will be seeing and hearing the phrase "death spiral" a lot more in the coming weeks.

stocktivity's picture

Maybe Padilla ought to visit Putin and ask for help. Wouldn't that piss off Obama.

EscapingProgress's picture

That would be the most effective way to get an instant bailout. If no bailout deal is forthcoming then allow Putin to drop off a few nukes and a team of "advisors".

mademesmile's picture

"death spiral" then "contagion" then "total economic collapse"

Mark Urbo's picture

I second your comment on ZeroHedge as the go to place for info !

shantyman's picture

We are Baccarding some folks! 

AustrianJim's picture

It would be interesting for Bruce Kasting to discuss how this has turned out with respect to his detailed analysis on PR bonds a couple of years ago.

disabledvet's picture

No one is "doing" anything.

Everyone is just standing around watching their "television" for the "news."

Bryan's picture

Puerto Rico for statehood!  There's always room in the Big Tent.  Let's see... we'll put them right next to Wash DC.

two hoots's picture

Puerto Rico is playing the vote card with elections coming up.  Votes for debt relief and it will likely work.

Bryan's picture

As long as they vote Democrat, I'm sure they'll get all the support they need from Washington.  And they get the bonus of Gay Marriage thrown in to sweeten the pot.

onewayticket2's picture

bail out>Statehood>democrat votes in exchange for bailout>accelerated 'death spiral'

OilCaptain's picture

Looks like a buying opportunity! 

PrawnStar313's picture

“I am not kicking the can, my foot is already sore from years of kicking it."

mastersnark's picture

No worries, a couple of mouse clicks over at 33 Liberty Street should make it all better. That, or the "Save Ricky Ricardo's Homeland Act" will soon pass Congress to bail them out.

Xiuhcoatl's picture

Rickey Ricardo (Desi Arnaz) was of Cuban descent.Even if Wikipedia didn't confirm this, his facial structure gives him away.

mastersnark's picture

Cuba, Puerto Rico...they are all Mexican colonies. Probably.

Fukushima Fricassee's picture
Fukushima Fricassee (not verified) mastersnark Jun 29, 2015 11:02 AM


Spungo's picture

PR is in a buying opportunity spiral

Colonel Walter E Kurtz's picture

What is wrong with the rest of the states?

It looks like they can afford to pile on a bunch more debt. Any good Wall St. takeover artist would see this as an opportunity. Buy a controlling share of these entities, get bank loans/issue bonds, payout bonuses and then declare bankruptcy when cash flow becomes a problem.

headhunt's picture

Puerto Rico is a welfare state and exists only to suck up US tax dollars. Their laws are unworkable for anyone other than citizens of Puerto Rico and as such no sane company or person will invest in that shit-hole.


Puerto Rico, the other communist state - F' them - twice.

garcam123's picture

I speak from multiple personal experience, the Puerto Ricans have some HOT BEAUTIFUL Women!

I've been through a herd of them.......so sweet....If I don't get Oldtimer's disease, I'll always be rich....with memories....The surf and the girls....thank you Lord!

mademesmile's picture

I wish there was a website of some sort for accurate informtion that would have WARNED everyone about Greece and bonds :-)

That being said, things like this happen in 3's so wonder what the nezt shoe to drop will be?

headhunt's picture

Obama will come out as gay

Charming Anarchist's picture

Joan Rivers will rise from the dead.

gonetogalt's picture

There is such a site, just search for 'ZH'.

conscious being's picture

"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,"

When you say hedgefunds we're talking about The Fed? Right?

No worries The Fed can backstop everybody. The Fed can backstop infinity.

THE 4th Quadrant's picture

Might as well invite Haiti in as a commonwealth. Lots of voters.

all-priced-in's picture

Graph is pure garbage -


You do a graph to visually provide some information.


Without including UNFUNDED pension costs as a liability the % of debt to GDP is meaningless.

ejmoosa's picture

GDP is also meaningless.

Let's graph all this debt relative to incomes and profits....

I have.  It will blow your doors off.  THis debt isn't getting paid back.

And anyone holding these IOUs and think themselves wealthy is a sucker.

1033eruth's picture

NOTICE THE CONFIDENCE IN PONZI SCHEMES?  Investors, whether retail or otherwise keep invested in Ponzi schemes until the sky actually starts falling.  Above is proof.  Until the governor said No Mas, everything was expected to be balanced on the backs of the Puerto Rican taxpayers.  

Here in the US, it will be 100 times worse because so many have Stockholm syndrome and complete confidence in one of the most corrupt and fraudulent governments in mankind's history.   

ejmoosa's picture

Greece, Peurto Rico, Soon Chicago....

Thank God we have such capable hands at the Federal Reserve to destroy economies slowly and not all at once.  

trentusa's picture

Isn't the IRS A Puerto Rican based institution?

PFO's picture

Sorry trentusa,

It's worse than that:


The whole alphabet soup of federal agencies is licensed through PR to The City of London:


Richard McDonald once showed me copies of the original tax treaty between PR and the IRS recorded in TCL:


 He's been explaining the labrynth of federal contracts-licenses-lies for the past 25 years.

 So, if PR defaults we can probably assume it's a planned action of "Them", to put "Us" into some Orwelian NWO sooner than We think.

IndianaJohn's picture

My first encounter with third world orcs was back in 1961. They were Porta Rickans.

Puerto Rico is worst than Greece's picture

Puerto Rico is a Keynesian heaven. I shit you not, the economy grows when a hurricane hits because of the pouring of FEMA and disaster relieve funds from the federal government.

fowlerja's picture

Oh no... my stocks are going to take another hit after being greeced over...please pass me a bottle of Puerto Rico rum..

SMC's picture

Perhaps we should focus on building sustainable economies which do not require infinite growth...

farflungstar's picture

Fuck these welfare queens. 

I've heard it is a nice place and the people there aren't at all like the lazy, stupid and violent PRs who infest the city where I live. But a welfare queen she be.

One Eyed Jack's picture

Give me your lazy, your poor,
Your huddled fat asses, yearning for free shit.