Puerto Rico Faces "Public Unrest" As Cash Crunch May Leave Government Workers Unpaid

Tyler Durden's picture

Heavily indebted Puerto Rico was due to meet with representatives of its creditors on Friday in a desperate attempt to forge ahead with a plan to restructure some $72 billion in debt. No offer is expected to be made at the meetings in New York, but the commonwealth’s Government Development Bank says it hopes to provide creditors’ advisors with greater clarity on "the proposed restructuring process,” which GDB says “is a comprehensive plan that will benefit all parties while supporting the creation of a sustainable path forward.” 

As Reuters notes, “creditors have been resistant to cuts to their repayment, insisting that Governor Alejandro Garcia Padilla's administration do more to curb spending, boost government efficiency and promote economic growth.” 

The GDB is facing a $354 million principal and interest payment on December 1 - some $270 million of that is GO debt guaranteed by the National Public Finance Guarantee Corp. Defaulting on that is bad news and as Moody’s warned earlier this month, a missed payment on the commonwealth’s highest priority obligations “would likely trigger legal action from creditors, commencing a potentially drawn-out process absent swift federal intervention.” 

Another $303 million comes due one month later on January 1. 

GDB called Friday’s meeting with consultants and advisers “part of our continued effort to maintain a constructive and open dialog with our key stakeholders" while a spokesperson for the governor promised Puerto Rico is doing everything in its power to make the December 1 payment although Padilla has repeatedly made clear that if it comes down to defaulting or cutting off services to the people, bondholders will be out of luck.

Here's a bullet point summary of recent developments from BofAML:

  • On 6 November, Puerto Rico released its unaudited quarterly financial and operating report. In the report, Puerto Rico makes plain that it faces a near-term liquidity crisis, has too much debt, limited ability to raise revenues, and a near-decade-long recessionary economy. As a result, it is our opinion that it will likely need to restructure its debt and, absent a voluntary restructuring, will prioritize essential government services at the expense of debt-service payments.
  • Moody’s believes Puerto Rico is likely to default on at least a portion of its scheduled debt-service payments due 1 December, which include roughly $273mn of GDB debt guaranteed by the commonwealth.
  • Moody’s Analytics opines that, without near-term Congressional action, Puerto Rico may very well suffer an economic depression.
  • The US Senate Judiciary Committee scheduled a hearing on Puerto Rico’s financial crisis for 1 December. The Committee’s Chairman stated that allowing a debt restructuring without requiring structural and fiscal reform would be throwing away taxpayer money.
  • The Puerto Rican House and Senate approved significantly amended local control board bills from the one the Governor submitted, turning the proposed “control” board into an “advisory” board. The two bills will need to be reconciled.
  • The Puerto Rico Highway & Transportation Authority (HTA) cancelled $228.5mn of Ambac-insured bonds, a positive for Ambac-insured bondholders, as the insurer will have more claims-paying ability should Puerto Rico or its public corporations default

And here's BofA summing up:

In a nutshell, the commonwealth warns: it is facing a liquidity crisis, set to run out of cash this month, and revenues are coming in lower than expected; debt is too high, and needs to be restructured; the economy has been mired in a nearly decade-long recession, and economic factors limit Puerto Rico’s ability to raise revenues; healthcare and retiree costs, along with other essential government services are more important than paying debt service; and, with a lack of access to the capital markets and little room under the constitutional debt cap, it is unlikely that Puerto Rico will be able to borrow to finance its operations. 

Speaking of running out of cash, Height Securities analyst Daniel Hanson now says the acute liquidity strain may well mean that Padilla can't pay government employees and you know what that means: social unrest.

"Puerto Rico’s liquidity strains are 'serious' and will likely create 'greater levels of public unrest' into year-end," Hanson said this week in a note, adding that the "island’s Treasury Single Account likely has negative cash balance, will make it 'nearly impossible' to meet all government payroll obligations over the next six weeks."

As for whether any of this can be avoided, a Senate judiciary committee headed by Iowa Republican Charles Grassley will meet on December 1 to discuss a legislative proposal to assist Padilla. As Bloomberg notes, "Republicans would prefer that Puerto Ricans solve the crisis on their own, but if they can’t, lawmakers will probably seek to impose 'something like' a federal control board."

But this will likely be too little too late. Expect a partial default and if the government can't make payroll, they'll be trouble in paradise. 

We close with a quote and a table from Moody's Analytics (via BofA). As you'll note, under the "pessimistic scenario," Puerto Rico is in for a long and painful ride.

According to MA, under this scenario, “[t]he government would have no choice but to severely cut spending and jobs, pushing the economy deeper into recession, and further undermining revenues and the government’s fiscal situation. This vicious cycle currently plaguing Puerto Rico will only intensify. Moreover, the territory’s standing in capital markets would be irreparably harmed."


Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Boris Alatovkrap's picture

Do not panic! USSA is come to rescue!

SILVERGEDDON's picture

Pissed off to epic proportions.

Came here to more closely examine the Stars and Stripes.

Bewbies MIA.

This has to be illegal.

Bunghole's picture

Click on the printer friendy version at the bottom of the page.

Boobies

NoDebt's picture

As I read up and down the thread I think it's official.  We all want more titties, Tyler.  Bailouts are boring, boobies never lose their appeal, no matter how many of 'em you've seen.

Save_America1st's picture

< More boobies on ZH

< Less boobies on ZH

 

*I voted first for more boobies on ZH ;-)

TBT or not TBT's picture

Latina Lover is getting a time share down there.  

knukles's picture

Let's not everybody go belly at once now, ya' hear.

NoDebt's picture

The dude who used to post up nothing but porn links got banned just a couple days ago.  Now that's irony.

 

OrangeJews's picture

Never go up against the establishment.

macholatte's picture

Puerto Rico to be the 51st State

 

FUNDAMENTAL TRANSFORMATION

CHANGE YOU BETTER BELIEVE IN

runswithscissors's picture

send them some Syrian "refugees" they're good for the economy...just ask Europe

Kirk2NCC1701's picture

You mean that he should not have directed them to cool, free sites, like Beeg or Pornhub or Redtube?

I guess I won't provide such links, now that I know.

claytonmoore50's picture

"Latina Lover is getting a time share down there. "

Is Latina Lover a guy who loves latinas or is Latina Lover a latina chick?

TruthHunter's picture

Latina Lover a latina chick?

 

Read his profile.

Actually, they are trying clamp down on non property tax paying absentee owners. Primary residence are tax free.

There might be great opportunities for Gringos to retire there.

herkomilchen's picture

God bless that woman indeed.

BarkingCat's picture

I think if those boobies belong to a certain club, we might not want to see them.
For example I doubt if many want to see ones the belong to Surrendered Against Gravity, or SAG for short.

ZerOhead's picture

Coming to all nations that have a banksterati designed debt-based Ponziconomy system... so basically everywhere.

P.S.  Get ready for the Globalists "gold-backed" IMF-SDR that Volker was yammering for...

two hoots's picture

FYI: Puerto Rico and the other U.S. territories get to help nominate the presidential candidate in the primaries (hillary or bernie, donald or Dr C)  but cannot vote in the general election because of the electoral college thing. That is why they are pushing it now, during the primaries to get support.

ZerOhead's picture

Puerto Rico > Puerto Pobre

herkomilchen's picture

Where is my clickbait, dammit.  Never promise something like that then fail to deliver.  That's as bad as promising to raise interest rates and then failing to deliver.

Normalcy Bias's picture

Have no fear, the last 'Ricans will move to the mainland and be reliable Democrat voters.

Larry Dallas's picture

If you like your cockroaches, now you will have to pay for them... 

I say don't let them have their first week of June Puerto Rican Day Parade until they pay their bills. That will show them! 

ZerOhead's picture

Nobody leaves the island until the bankers are paid...

NoTTD's picture

No one here gets out alive.

Kirk2NCC1701's picture

Can't they just self-declare themselves as GayBLT Colored Refugees?  

That's gotta be worth a bunch of immigration points.  Or points for more HP call centers.

aliki's picture

easiest headline u guys ever posted; just cut & pasted from a few months ago & injected "puerto rico" where "greece" was

Normalcy Bias's picture

Moody’s Analytics opines that, without near-term Congressional action, Puerto Rico may very well suffer an economic depression.

Way to step out on a limb there, Moody's!

kralizec's picture

Their Head Witch Doctor is Captain Obvious.

CaptainObvious's picture

I resent that.  I'd rather work for Satan himself than Moody's.  You are microaggressing into my safe space.

Tachyon5321's picture

It should be pointed out that Moody Analytics projected that Obama's $823 billion dollar stimulus program would generate new 400,000 job a months... LOL

Nanur's picture

Trump will now switch from bashing Mexicans to bashing Syrians to bashing Puerto Ricans?  

Bill of Rights's picture

I say fuck all three...there I said it.

ToSoft4Truth's picture

Para bailar la bamba
Para bailar la bamba
Se necesita una poca de gracia
Una poca de gracia pa mi pa ti

NoDebt's picture

I got $20 real cash money says Brother Obie strokes a pen across a check for this one.

DaddyO's picture

Sucker's bet!

DaddyO

PS: If you're setting at the poker table and you don't know who the patsy is, it's you sucker! The current patsy is the American taxpayer...

83_vf_1100_c's picture

  I dunno. Do the math. We can pay them to stay in PR or we can pay for them in Miami. Just speaking for myself but I don't see a big demand for Puerto Ricans here in East TX. We have a surplus of Mexes.

papaswamp's picture

Damn... I wanted to see a bigger pic of the chick in the bikini...

rejected's picture

OMG!!! The parasites going without their pint of sheeple blood.

Shizzmoney's picture

Puerto Rican women are the best in bed 

10mm's picture

So are those Catholic Irish women. Tigers

Larry Dallas's picture

But the Catholic Irish woman don't age very well. Their faces will resemble a catchers mitt after 40... 

The Puerto Rican's can get some after market work done for cheap and then you have a rebuilt rican milf! Ha! Rebuilt Rican! Hahah!