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First Default By U.S. Commonwealth In History: Puerto Rico Fails To Make Required Debt Payment
Over the weekend Puerto Rico was supposed to make a modest principal and interest payment of some $58 million due on Public Finance Corp. bonds, which however few expected would be satisfied. As a reminder, on Friday, Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla, said during a press conference in San Juan that the government simply does not have the money.
Moments ago Melba Acosta, president of the Government Development Bank, confirmed as much, when he announced that only $628,000 of the $58 million payment, or just about 1%, had been paid.
Below is the full statement from Acosta on the service of PFC Bonds:
Today, Government Development Bank for Puerto Rico ("GDR") President Melba Acosta Febo issued the following statement on the service of Public Finance Corporation (PFC) bonds:
Due to the lack of appropriated funds for this fiscal year the entirety of the PFC payment was not made today. 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.
"PFC did make a partial payment of Interest in respect of its outstanding bonds. The partial payment was made from funds remaining from prior legislative appropriations in respect of the outstanding promissory notes securing the PFC bonds. In accordance with the terms of these bonds, which stipulate that these obligations are payable solely from funds specifically appropriated by the Legislature, PFC applied these funds—totaling approximately $628.000—to the August 1 payment."
WSJ adds that the payment to bondholders is the first skipped since Governor Alejandro Garcia Padilla in June said the island’s debts were unsustainable and urged negotiations with creditors in an effort to restructure about $72 billion. "Still, analysts said it isn’t likely to provoke an acute market wide reaction from investors, many of whom have been inching away for the commonwealth for years."
Except for those hedge funds who haven't, and have been BTFD in hopes of another bailout of course.
And confirming that making just 1% of the contractual payment is not the same as making 100% of it, moments ago Moody's confirmed what most had already known:
- MOODY'S VIEWS PUERTO RICO IN DEFAULT
More via CNBC:
"Moody's views this event as a default," Emily Raimes, vice president at Moody's Investors Service, said in a statement, adding that payment of "debt service on these bonds is subject to appropriation, and the lack of appropriation means there is not a legal requirement to pay the debt, nor any legal recourse for bondholders.
"This event is consistent with our belief that Puerto Rico does not have the resources to make all of its forthcoming debt payments. This is a first in what we believe will be broad defaults on commonwealth debt," she added.
In other words, small or not, PR has failed a mandatory principal repayment and is now in default under the PFC bonds. Up next, as per Bloomberg's preview "the default promises to escalate the debt crisis racking the island, where officials are pushing for what may be the biggest restructuring ever in the municipal market."
“An event like this is significant enough that it could hurt prices for Puerto Rico bonds,” said Richard Larkin, director of credit analysis at Herbert J Sims & Co. in Boca Raton, Florida. “I can’t believe a default on debt with Puerto Rico’s name will go unnoticed.”
It is unclear if creditors will now threaten the commonwealth with a "temporary" expulsion from the dollarzone as part of their hardball negotiating tactics. Nor is it clear if Schauble is still willing to trade Puerto Rico for Greece.
What is clear is that the first default by a US commonwealth is now in the history books.

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Independence for Puerto Rico now!!!
sorry.Somebodies musta looted all the wealth out of that commonwealth
I will give you one guess, and a hint, the initials are GS
well I guess something is better than nothing.
Apparently, this may have been strategic.
http://www.planbeconomics.com/2015/08/its-happened-puerto-rico-misses-58...
In comparison to Greece, nobody holds his breath!
"and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained."
Deserve.. You Keep Using That Word, I Do Not Think It Means What You Think It Means.
“An event like this is significant enough that it could hurt prices for Puerto Rico bonds,”
COULD hurt? lolz. More like WILL hurt.
all those pr welfare scammers and their 20 kids finally sunk the island.
We defaulted on some folks
What they say? 100 out of 10 Ricans are on the US welfare dole?
Hey Ricans. Cuban's are US friendly now. We DON'T fucking need you anymore.
Throw those worthless Puerto Ricans out of the Union!
(Couldn't help myself)
NBFD,… Buffett will buy the whole joint..
and Rosey Roads will be his new private airstrip-.
P.R. is Florida's "Mexico". Next thing you know, obama is going to be shipping the population of the whole fucking island into Florida.
That oughta push FL into about 75% full blue libtard forever. Kiss FL goodbye. This will be another invasion of our borders and a massive infusion of millions of FSA soldiers to fuck shit up and to vote against the Constitution and our rights.
And if we don't like it then obviously we're just a bunch of Confederate flag waving racists, of course.
There aren't too many places safe anymore from these treasonous cockroaches and their foot soldiers.
I happened to Catch Pedro Pierluisi (US Congressman PR) a month ago on CNBC with him spouting off shit like "This is all ridiculous talk, PR will NEVER default!!"
Piece of bought & paid for congresss shit should be gutted then hung out for the vultures.
PFC, Puerto Rico Froed Chicken didn't get paid?
Oh cheeeit, mank! Da essss velly velly batd. I steeek you.
I think NYC is 50% Puerto Rican and 50% Haitian. However, the PR chics are hot.
bought & paid for congresss shit should be.....
Ok.. so how do we put the team together and who has the sharpest blades?
.. just a joke ..
PR ...what a lovely island.. land of tropical breezes and the money owing.. and the hurricanes blowing
Smoke on your pipe and put that in.
https://www.youtube.com/watch?v=Qy6wo2wpT2k
But a little OT, now but interesting.
It’s 40C in Qatar now as the political turkey’s are debating stuff and roasting.. as well as all of the press and their electronics.
However, the PR chics are hot.
Pics or it didnt happen.
Can I find these hotties on porntube?
Hawt! And it appears that they come in more than one color!
Larry Ellison has a thing for islands...why doesn't he put another $30 Billion on his Oracle Credit Card (thank you FED/ZIRP) and buy himself a Carribean island..PR's got some nice beaches.
Vieques or Culebra is enough. The mainland has too many PR's infesting the place. He could probably buy both of those islands for less than $1 billion
Irony of it all: PR has too many PR's infesting (akin to bedbugs) the place.
I gotta tell y'all. I had biz in PR with a few of the "gov't" "agencies" for a while and all it took was a few visits where we traveled about as opposed to just staying in the hotel/meeting/dinner/hotel/flight home routine and meeting quite a number of "civic leaders" to come to a very, very deep conviction that investing in PR is not a good idea.
Dere's sumptink wrong, Luchi!
When is Paul Singer going to buy the bonds and start trying to sue them in NYC courts?!..........he needs to make up ground after Argetina gave him a bit of a beating in default.
Critical Mass Default?
All I want to know is what does ISDA say about this?
"CDS? Never heard of 'em." -ISDA
Looks like Sharks vs Jets all over again.
Good luck covering your expenses next month, Chica
Cue Obama proposing making Puerto Rico a State to solve this problem.
Miffed
The 58th State?
Just what we need.
I don't know... that's a BIG hunk of dead wood floating out there.
Exactly.
Yo no soy mas dinero
I also had a difficult time swallowing the word "deserve". I sure wish reporters and other media people would stop using loaded words like this. "Aww, the poor citizens don't get their entitlement to their natural right of existence, regardless of the degree of effort or planning they put toward the preservation of their own lives" or some such blatant nonsense (which is apparently missed by most people).
Greece was down 16% today. That is a market crash.
But but but off the lows (-23%).
buying opportunity
up 7% from the low...that's not a crash, it's a recovery! buy buy buy!
Going Puerto Grico.....
What I don't get is how they skipped straight past arrears and into default.
At least greek only went into arrears, I don't think I ever saw the greeks go into default.
This may be more serious than initially anticipated.
Good for PR.
Lets see what this does to Munis across the 50.
Yep, this sends the message that the days of back door bail outs are over. First, with many more to come....soon
The teacher union pension funds are shitting their pants.
Bail out from Obammy in 3...2...1...
Default?
Hold your horses, vaquero; it's only a default when the central banks *say* it's a default. This is probably a temporal credit anomaly which is *nothing* like a default. So it's all good.
I believe the preferred nomenclature is "indefinitely in arrears."
they've "bundled" the payments - all payment up to and including 31st of Dec, 2063 have all been "bundled" into one payment.
no default.
The new normal phrase is - indefinitely deferred non-payment.
Will be magically converted to Zero Coupon. Now we know why they were excusing gringos from US taxes if they would move there. Well, grand idea but only about 20 years too late. Make the pharmas, the TAX FREE pharmas, pony up, they reneged on the Caribbean Basis Initiative's IRS 936 program. Hail to the FDA bootlicks and the IRS sychophants!
We are soooo fucked.
exactly!! Perhaps the IMF will declare them in arrears. Kiss our arrears goodbye bankers..
I still laugh at the mere thought, of the absurdity, of any entity with a collective IQ in excess of 40, loaning billions of dollars to Puerto Rico.
They be playing for the bailout, man.
Rumor has it Steve Lies-man was the advisor.
Ya think we can sell it back to Spain now?
Don't you dare. They use Maria for an excuse to start World War III.
https://www.youtube.com/watch?v=Qy6wo2wpT2k
0:40
God, Rita Moreno was something else...
Wait a minute. Aren't these Moral Obligation Bonds? Meaning not:
1. REvenue bonds
2. General Obligation Bonds
but the bottom of the heap Moral Obligation bonds?
I will give you one guess, and a hint, the initials are GS
Absolutely jesus titty fucking christ right!
There always seems to be a Goldman Turd that will never flush without the plumber for the self anoints setting another alchemist lab that turns blood to gold... 4-x
June 2011: Puerto Rico selects the abertis/Goldman Sachs consortium as preferred bidder for a toll road concession
The Puerto Rican government has selected the consortium headed by abertis and the investment fund Goldman Sachs Infrastructure Partners II as the preferred bidder to manage the PR-22 and PR-5 toll roads. The consortium, which will manage both toll roads for a 40-year period, will invest a concession fee of US $1,080Mn (€762Mn).
The contract will be carried out through a consortium formed by abertis (45%) and investment fund Goldman Sachs Infrastructure Partners II (55%). Approximately 40% will be funded through capital contributions by the partners, with the remaining 60% financed with long-term debt. The consortium, which will manage both toll roads through a jointly-owned company, Autopistas Metropolitanas de Puerto Rico LLC (Metropistas), has already secured a firm financing offer from a group of 12 banks.
The contract closing is expected to be finalized in late September, following completion of the bid process.
and on and on and on and on ... infinity.
Libya, Greece, US, and probably everybody else suffering the misfortune of narcissistic ignorance that allowed their government employees to visit the K-Street Kiddie Brothels, with GS discount coupons, meaning anybody doing business with the WZO (Yiddish for "London Shadow Bankers").
And how come long bond efts don't look like the expected mirrored reflection of a matched short bond etf?
Probably the Govenor who went on vacation as the commonwealth defaulted.
Does it strike anyone as odd that they really don't care that they defaulted?
Default? Only if ISDA says so!
Regards,
Cooter
So, who has taken out some derivatives on PR debt and is looking for the fat multi-billion dollar paycheck? Probably someone who is "richer than you" perhaps? Good thing the FDIC is on the hook (they´ll be wiped out by Thursday).
If they had been made a state in the 1920s, this never would have happened.
And If my Uncle had a cooter, he'd be my Aunt.
"And If my Uncle had a cooter, he'd be my Aunt. "
LULZILICIOUS!
This looks like a job for Commandante Pachuco.
nothing will happen. behind the scenes, this will be papered over, ensuring an even bigger crash somewhere down the line.
Kick the can is a monthly event in the USSA.
PRexit?
"strategic" -yeah -that's the ticket...why couldnta I thunka dat...
what'll they call when the whole whole USA does a Greece at 2.25%?--prolly "Putin's Fault"
The greece playbook
As the Bond holders walk into the Pentagon to meet with the military to see what they can do about this default, they call Puerto Grico and say "ok ok ok, no problem here at all, I see you didn't make a payment but no need to worry we are all friends and I'm sure it was a mistake. I tell you what I'll extend the payment deadline by one week my dear friend. Have a great day, bye now."
Then said bond holders ask the military, "ok we have one week to figure out how we can take over Puerto Grico and make them pay dearly, they think we are friends...LOLZ"
The End.
Independence Day for Puerto Rico, YES!!!!!
Stop their freeloading on US Taxpayers.
What do you have to show for the $72 BILLION THAT YOU OWE!!!
freeloading?
the US is raping Puerto Rico
leave now and Puerto Rico will prosper when the parasites are gone
Right, bailout via statehood.
It's for the children.....
This wouldn't mean a damned thing to the US except that the piece of shit progressive Teddy Roosevelt "won" that island for us. Now Central Florida is going to be flooded with still more of them as if we don't have enough already! Does anyone know where Teddy is buried? I'd like to piss on his grave.
Youngs Memorial Cemetery, NY
https://www.google.com/search?q=teddy+roosevelt+burial+site&espv=2&biw=1...
Piss away.
I heard Jimmy Margaritaville already cut another version of "They all got cousins in Manhattan". Miami has the cousins to the other 1,000 Carib Islands, mon.
By Puerto Rico, are they referring to the island or NYC?
They don't want it.
They call the island commonwealth it should be called commondebt or commonbroke.
Been to both. Greece is WAY better than Puerto Rico.
Maybe it is hoping that 99% of the principal is written off. Greece needs such a deal. As do US unemployed students with high student debt
PR has put a new spin on the "99%ers"
NoVa
Shit, the whole global system needs to be written down. The proggie experiments to keep castles in the air have failed. Time to write the whole thing off and move on. But that would impair the trillionaires' ledgers, and they do so like to be trillionaires.
Hey, PR, just give them the deed to that big satellite dish at Arecibo, call it even, throw in Jodie Foster and SETI to boot.
Hey! It works! Lets all try that shit! Gas is 2.6c/gallon! And i'm living in my house for about $12/month!
[Scene: married couple on winter holiday in a small, charming chalet in the mountains, after several straight years of record snowfall]
Wife: "Honey, what was that sound?"
Hubby: "Just some thunder. Pour me another glass of wine, will you please?"
+100 for Hubby having someone to pour his wine.
Spill The Wine
Why even bother wasting the 1%? Is it so you can say "I paid some?"
if ur dumb enough to "invest" in a "sovereign" fixed income instrument, u deserve to lose all your $$$ if/when it goes belly-up
should lose double your $$$ if you "blindly invest/contribute" to bond funds which you THINK are safe/secure YET you don't research exactly what the fuck they are allocating too. up until now, there has been extremely limited mention of default risk, rather just a lust for yield in these high yield (for a good reason) vehicles.
simply 1 more reason she can't raise rates. spreads are widening. just check the differentials between investment grade corporates & high-yield; simply can't have the world's largest commodity (oil) blow-up (and continue to blow-up) wher 35% of the high-yield issuance the last 5-7 years was in energy and NOT have bodies floating in the water.
+- Ouch!
"An event like this is significant enough that it COULD hurt prices for Puerto Rico bonds,” said Richard Larkin, director of credit analysis at Herbert J Sims & Co".
Obviously with such financial insight and acumen, Larken should be nominated for the "Hawking / Nash" Financial Equilibrium award. I'd say more but I'm going to try to beat the rush to sign up for the latest Herbert J. Sims Investor Insights newsletter.
Fate the Magnificent
"Push the Button, max"
Yeah that guy is very perceptive. I wonder what Gartman's take is on this event? He probably was long 6 months ago and now is bearish. Maybe these 2 guys could get together and start a hedge fund.
Beat me to it, but I'm surprised you didn't refer to Sims as a thimble-headed gherkin.
im sure this explains the ramp of the Dow over 100 points in the last 30 minutes of trading to avoid - wait for it - another triple digit loss....
FUCK OFF.
For the stockmarket: No Puerto Rico, but I see few people with Apple watches.
They don't pay federal income tax but the libs think the fed gov should bail them out. Just what we need more riders instead of rowers.
But if you don't have riders you dont' need rowers...right? I thank the Fed for my degree in circular logic.
Downvoted you for using the term LIBS asking for bailouts.
WTF, where have you been? Bailouts are for corporitistas, not slaves. For slaves, it is called EBTs.
GS is on the phone.....
Quick. Someone needs to loan them some money so they can repay their debts.
Who? Those jumping grey men on the 14th floor.
Is 14 high enough for terminal velocity? We don't want any mistakes.
We could hand out nail guns as they approach the window to jump.
It's officially shit.
Now Central Banks can buy it!
"Bad Bank" evolves to "Bad Island"....
In other words, we aren't sending enough in taxes to you to pay us back for the loans you took from the U.S. government.
Ouch - 70 Billion - hopfully the pain will be spread thin amongst the hedgies and Mutual funds.
When you owe the bank $7,000 you have a problem when you owe 70,000,000.00 the bank has a problem.
"When you owe the bank $7,000 you have a problem when you owe 70,000,000.00 the bank has a problem. "
It isn't in the bank.
It has been stuffed into the Pension Funds trying to outrun ZIRP.
When the retired school teachers, cops, teamsters, and IRS flunkies start screaming it's gonna all get shoved up the Taxpayer's ass to shut them up...
All the shit always gets straight down to the taxpayers.
Kick ass crazy Ricans
If I make the payment for them, can I declare myself Rey de Puerto Rico?
i'm sure you can get a prettier title for less
How about Comandante Supremo y Señor de Protección de la hermosa isla de Puerto Rico
"White Boy don't know nuthin' 'bout Conga."
Si.
Yes, until the next payment is due....then you become "el dogpoo"
No but you can call yourself Rico Suave.
I don't normally defaut, but when I do, I make sure it is from an Island.....
Stay Over Leveraged my friends....
RaceToTheBottom for the thread winning comment!!
todos somos puertoriqquenos
The CFR is not involved in this. BTW that patent registered.
Put PR into the World Conservation Trust.
World Soverein Debt coming soon.
Sweet, consequences? Bitches!
Give it back to spain, retroactivly, and have all of them here go back.
For Zion the roof is not falling: Zion will, on paper, lose some of their printed plunder, fiat-debt, and gain hard assets based on claims derived from those fiat-debts.
The only ones that will lose real wealth are those not close enough, connected enough, or "chosen" enough to Zion.
Liberty is a demand. Tyranny is submission..
The slithers will slither away, while Zion will slither in deeper.
Time to change PR's name.
Puerta Dueda
Come this fall and winter..there will be many many meeting in PR..cause that is when the weather is the best.....then they will get this worked out..IMF..everyone will be there..even the EU I bet
Fun to watch the bankers play monopoly.
The monopoly board should be changed.
One deck of cards called "for the good of the earth".
No, no, they paid some of their debt today. From CNN: "On Monday, Puerto Rico had to make a monthly debt payment of $483 million. Puerto Rico paid all its debt due except the $58 million due to creditors of its Public Finance Corporation. The government is strategically choosing not to pay the PFC debt because the entities that own the debt, credit unions and ordinary Puerto Ricans, have little legal power to fight back in court. The other debt -- some of which is owned by Wall Street hedge funds and hence has more legal clout-- was paid on Monday. Puerto Rico has the same amount of outstanding debt as New York. Yet its economy -- worth $69 billion -- is just a fraction of the Empire State's $1.2 trillion."
And there you have it...
The Chinese already own Radio City so maybe they want to buy PR also? It's a beautiful island if they could get the crime under control; as joblessness rose, crime and drugs rose same time.
This 70 billion is just child's play. The monied interest of W.st will just stuff the losses onto the backs of the 401(k) holders.
Let's be real here, they are NOT going to let something like this bring down the party.
Their shitting bricks in NYC about it right now, but you didn't hear that from me, NOO sir re.
Their =/= they're
20,000 dollars of debt for every rican, and the us is likely sending them another 20,000 per head in welfare annually. this is some serious corruption, common Shitcago catch up.
Every month, I take the names of my creditors, write their names on a slip of paper and put them in a hat. Then, I draw one name and pay that creditor.
If you don't stop bustin'my balls,
your name don't even make it to the hat.
So, you're a billionaire as well ?
Actually my billionaire clients pay promptly, its the ones in the 100's of millions that
don't.
In NYC when Puerto Ricans don't pay their debts it is customary to call them Dominicans.
+6 more for longevity!
http://www.zerohedge.com/users/throxxofvron
There goes the, "It won't happen here" meme.
So can we expect of flush of chrome spinner rims from government vehicles on EBAY?
I have seen some Prius's with spinners lately, except those were usually during a drive by shooting...
IMHO, the Democrats are going to do whatever it takes to get some kind of bailout.
Public and Private Sector UNION Pensions were padded with PR Bonds.
.GOV pulled the GM UNION Pensions out of the fire and what is at stake here is vastly larger in scope and magnitude.
Macafie keeps crashing my ZH site as if it is a virus. Over and over, Why? Only on ZH, no other sites.
Because you misspelled their name.
Adblock Plus. Macking Fee is basically a virus itself.
Push some BathSalts into the USB port.
Even the San juan whores will soon be credit downgraded
Highly likely; however, I will continue to pay a premium for morenas.
Let me get this straight, an island nation with almost no natural resources, dependent on foriegn imports, with 41% of it's population living below the poverty line, who's GDP is inflated by the IRS tax code, with a population of just over 3 million (leaving just 2 million over the poverty line) have how much debt?
Thank you sir may I have another?
https://www.youtube.com/watch?v=qJhJGBM7Wvo
We get what we deserve.