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"To Make The Payment Is Almost Impossible": Puerto Rico Defaults (Again) In T-Minus 9 Days

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Earlier this month, Puerto Rico narrowly avoided default by utilizing a revenue clawback end-around to make $354 million in debt payments. Some $273 million of the total due was tied to GO debt, meaning that had the island missed the payment, a cascade of messy litigation would likely have followed. 

Subsequently, PREPA - the island’s power utility - managed to secure a deal with creditors and the monolines that will allow for the restructuring of $8.2 billion in debt. Should the agreement materialize, it would be the largest restructuring in muni history. 

While some believe the PREPA deal could serve as a template for restructuring the rest of the commonwealth’s $70 billion in debt, it also presents a problem. Effectively, it proves that there are other options besides bankruptcy and that undermines Governor Alejandro Padilla’s plea to Congress. “The argument that’s been made in favor of Chapter 9 is that it’s the only means through which an organized, non-chaotic approach to Puerto Rico’s debt crisis can be put in place,” Mark Palmer, a managing director at BTIG LLC told Bloomberg last week, before noting that the PREPA deal “would argue otherwise.”

Still, Padilla and others contend that restructuring the rest of the island’s debt would be exceptionally difficult.  “The vast number of creditors with differing interests across all issuing entities would result in negotiations that are lengthy, costly and chaotic,” the Governor says. “Access to legal, broad restructuring authority would allow us to undertake these in an orderly manner.” A full account of the country's debt (courtesy of Bloomberg) is presented below.

On Tuesday, Padilla warned that a full payment of the nearly $1 billion that comes due on January 1 will be “almost impossible.” “To make a total payment will be almost impossible,” the Governor said. “If a partial payment is made: what bonds should we pay? It is an assessment that is being done. It is highly unlikely that there will not be default, in whole or partially.” Here's Reuters with more:

Puerto Rico first defaulted on its debt in August and has warned that more defaults are coming. It has an upcoming debt payment of around $1 billion due Jan. 1.

 

"It is very, very unlikely there is no default," Garcia Padilla said. "Very unlikely. In full or part."

 

Puerto Rico officials have given clear warnings of defaults. Garcia Padilla said earlier in December that the island "will default in January or in May," and Melba Acosta, president of the island's Government Development Bank (GDB) was quoted in local media last Friday saying the island is expected to default on a Jan. 1 payment on its Infrastructure Finance Authority (PRIFA) bonds.

 

Garcia Padilla on Dec. 1 granted the U.S. territory power to take revenues from public agencies such as the highways agency HTA, PRIFA and its convention center district authority via "clawbacks".

 

While the HTA and convention center have said in filings that they expect interest due Jan. 1 will be paid in full from funds in deposit, PRIFA has only said that funds on deposit would be applied to the Jan. 1 payment.

Of the $957 million due in January, $357 million is GO debt. Here's the breakdown, via Bloomberg

And here's a look at the bigger picture via Barclays:

And so, Puerto Rico defaults (again) in T minus 9 days. As for Padilla, he's doing his best. 

"If I have the money, and I don't use it to pay the government's obligations, then we lose the case in court in two seconds," he said this week. "Because if the money is there, I have to use it to pay." 

Yes, you "have to use it to pay" - unless of course you decide to spend $120 million on Christmas bonuses, which Padilla did this week. Our only question now is whether those bonuses will be "clawed back" just like revenue from Infrastructure Financing Authority, the Highways & Transportation Authority and the Convention Center District Authority.

*  *  * 

From Bloomberg

  • Puerto Rico Sales Tax Financing Corp.: $15.2 billion. The bonds, known by the Spanish acronym Cofinas, are repaid from dedicated sales-tax revenue. A $6.2 billion portion of the debt, called senior-lien, is repaid first. The remaining $9 billion, called subordinate-lien, get second dibs. $1.2 million of interest is due in February and again in May. Senior Cofinas maturing in 2040 last traded for an average yield of 9.5 percent, while subordinate ones yielded 18 percent.
  • General-obligations: $12.6 billion. The debt backed by the commonwealth’s full faith and credit. The island’s constitution says general obligations must be repaid before other expenses. Puerto Rico owes $357 million of interest in January and an additional $805 million of principal and interest is due July 1. Securities due in 2035 last traded for an average yield of 11.5 percent.
  • Puerto Rico Electric Power Authority: $8.2 billion. Prepa, as it’s called, is the island’s main supplier of electricity and repays the debt from what it charges customers. The utility owes $196 million of interest in January and $420 million of principal and interest July 1. Prepa is negotiating with bond-insurance companies after reaching an agreement with some of its bondholders, who agreed to take a 15 percent loss. Bonds maturing in 2040 last traded at an average yield of 9.2 percent.
  • Puerto Rico Government Development Bank: $5.1 billion. The GDB lends to the commonwealth and its localities. When those loans are repaid, the bank can pay off its debt. The bank owes $354 million in December and $422 million in May. Federally taxable bonds maturing in 2019 last traded for an average yield of 57 percent.
  • Puerto Rico Highways & Transportation Authority: $4.6 billion. The highway agency repays its debt with gas-tax revenue. It owes $106 million of interest in January and $220.7 million of principal and interest in July. The commonwealth has the ability to divert revenue that cover some highway bonds to pay its general-obligation securities, if there are no other available resources, according to the island’s most recent financial disclosure. Bonds maturing July 2028 last traded for an average yield of 32 percent.
  • Puerto Rico Public Buildings Authority: $4.1 billion. The PBA bonds are repaid with lease revenue that public agencies pay for their office buildings. The agency owes $102.4 million of interest in January and $208 million of principal and interest in July. Bonds maturing 2042 last traded for an average yield of 10.4 percent.
  • Puerto Rico Aqueduct & Sewer Authority: $4.1 billion. The utility, called Prasa, supplies most of the island’s water. The debt is repaid from water rates charged to customers. The water agency owes $86.5 million of interest in January and $135.1 million of principal and interest in July. Bonds maturing in 2042 last traded at an average yield of 8.7 percent.
  • Puerto Rico Pension-Obligation Bonds: $2.9 billion. The taxable debt was sold to bolster the island’s nearly depleted pension fund. The bonds are repaid from contributions that the commonwealth and municipalities make to the retirement system. The system pays $13.9 million of interest every month in this budget year. Securities maturing in 2038 last traded for an average yield of 22 percent.
  • Puerto Rico Infrastructure Financing Authority: $1.9 billion. Called Prifa, the agency has sold the island’s rum-tax bonds. These are securities repaid from federal excise taxes on rum made in Puerto Rico. Prifa owes $37.2 million of interest in January and $77.8 million of principal and interest in July. Bonds maturing in 2046 last traded for an average yield of 28 percent.
  • Puerto Rico Public Finance Corp.: $1.09 billion. The bonds are repaid with money appropriated by the legislature. The agency has defaulted every month since August on its debt-service payments because lawmakers failed to allocate the funds. It owes interest every month, the largest being a $24 million payment in February. Bond maturing in 2031 last traded for 7 cents on the dollar, according to trade reports. The yield wasn’t disclosed.
 

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Wed, 12/23/2015 - 10:09 | 6956044 NoDebt
NoDebt's picture

Oh boy, let's hope this doesn't turn into America's Greece.  (I hope it turns into America's Greece.  I need the entertainment.)

Wed, 12/23/2015 - 10:16 | 6956067 VinceFostersGhost
VinceFostersGhost's picture

 

 

Screw Puerto Rico......become a state and suffer with the rest of us.

Wed, 12/23/2015 - 10:20 | 6956076 The Pope
The Pope's picture

Day-O!... Day-ay-ayO!

 

"come mista tallymon tally me banana"

Wed, 12/23/2015 - 10:29 | 6956097 kralizec
kralizec's picture

Maybe if we just ignore them they'll go away...

Works for solicitors...

Wed, 12/23/2015 - 10:57 | 6956167 WakeUpPeeeeeople
WakeUpPeeeeeople's picture

Might be worth a side bet that they are bailed out by the american sheeple

Wed, 12/23/2015 - 11:52 | 6956355 DeadFred
DeadFred's picture

The Kenyan Guy issues an executive order and 1 billion will appear in their account overnight. "But remember you vote for my third term"

Wed, 12/23/2015 - 12:06 | 6956397 Antifaschistische
Antifaschistische's picture

Well, they are slightly darker complected than most successful American's...that does give them a point on the Kenyan scoreboard, however...they aren't muslim so that's a minus 2.

Wed, 12/23/2015 - 19:08 | 6958225 Al Tinfoil
Al Tinfoil's picture

"Interview of Puerto Rico's Finance Minister where he explains their "Plan B""

https://www.youtube.com/watch?v=DDIQNO8PS8M&feature=em-share_video_user

Wed, 12/23/2015 - 10:24 | 6956087 JRobby
JRobby's picture

Shut er down!

How will we light the Christmas trees and holiday light displays? It's so dark!

 

(Banksters in the shadows of palm trees in St. Barts, pina colada in one hand, $7,000 escort flown in special fellating him, laughing "because of all he's got")

Wed, 12/23/2015 - 12:33 | 6956490 RaceToTheBottom
RaceToTheBottom's picture

I thought Puerto Rico had all those Peter Schiff'tites that they could begin to milk with rich man taxes?

Wed, 12/23/2015 - 10:18 | 6956070 nuubee
nuubee's picture

There's nothing quite like giving birth to a new generation, and stealing from their future productivity via a piece-of-paper balance sheet to finance your own laziness now.

Wed, 12/23/2015 - 10:22 | 6956084 thetruthhurts
thetruthhurts's picture

Hey at least they were able to pay the government workers their bonuses right?

http://www.cnbc.com/2015/12/21/puerto-rico-government-pays-christmas-bon...

Wed, 12/23/2015 - 11:36 | 6956292 Calmyourself
Calmyourself's picture

There is the first clawback that should happen that bonus is unconscionable, you pigs

Wed, 12/23/2015 - 11:07 | 6956195 MrNosey
MrNosey's picture

It will not really matter, there will be a rush for the exit in the new year as it has just been discovered that the German Chancellor Angela Merkel is allegedly ‘Hitler’s Daughter’ and therefore we will witness the rise of the 4th Reich......

http://beforeitsnews.com/conspiracy-theories/2015/12/the-fix-is-in-franc...

Wed, 12/23/2015 - 14:29 | 6957063 Sanity Bear
Sanity Bear's picture

spam

Wed, 12/23/2015 - 11:30 | 6956270 Angel_Eyes
Angel_Eyes's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.wallstreet34.com

Wed, 12/23/2015 - 11:53 | 6956358 Buster Cherry
Buster Cherry's picture

3-way women are nothing new sweetheart.

Wed, 12/23/2015 - 10:12 | 6956053 chubbar
chubbar's picture

Ain't debt wonderful!!!!

Wed, 12/23/2015 - 10:13 | 6956058 ArtOfLife
ArtOfLife's picture

If only they had a printing press.

Wed, 12/23/2015 - 10:13 | 6956059 Truth Eater
Truth Eater's picture

Yes, you "have to use it to pay" - unless of course you decide to spend $120 million on Christmas bonuses, which Padilla did this week.

 

So the slimeball learned from Wall Street bankers.  I guess we should bail them out too.  What's a few billion dollars among friends? 

The right to fail and be driven out of town after being tarred & feathered should not be infringed.

Wed, 12/23/2015 - 10:19 | 6956073 I woke up
I woke up's picture

They are getting what they can while they can before the ship sinks, every gov't employee for himself

Wed, 12/23/2015 - 12:25 | 6956457 ThroxxOfVron
ThroxxOfVron's picture

$120 million in 'Christmas Bonuses' = robbing the till and then lying to the creditors as to what is available.

Simple thievery and misappropriation.

Wed, 12/23/2015 - 10:14 | 6956062 ayufan
ayufan's picture

with 19T in debt and many hundreds of billions unaccounted for... why can't US "rop $30B to bail them out? .. just say they are unaccounted or "missing"  as well.

 

Hedge Funds will be pleased

Wed, 12/23/2015 - 10:16 | 6956065 mayhem_korner
mayhem_korner's picture

 

 

Why don't they just tap on Greece for a bailout?

Wed, 12/23/2015 - 10:20 | 6956077 Arnold
Arnold's picture

First rule in modern business....

Pay yourself first.

 

My last bit of torture logic for the day:

 

Perhaps they would get better rates if they were dealing in CNY.

Zimbabwe to expand use of yuan as China cancels $40 million debt (Times Live)

Wed, 12/23/2015 - 12:31 | 6956483 ThroxxOfVron
ThroxxOfVron's picture

BULLSHIT.

A 'Christmas Bonus' is NOT payment of wages due.

A bonus is supposed to be provided based only upon exemplary performance as exemplified by such high productivity that profits or savings via efficiencies provide a surplus from which to draw the bonus.

These assholes can't even meet their payments and base bills let alone pay anything down, thus there is no surplus; -the 'bonueses' are merely expropriation of payments due that are being dispensed to the bureaucrats to buy political cover for the looting.

...& if the rtank and file are being gifted with hush money you can bet that the amounts the high officials and their closest cronies have absconded with is many multiples of this $220 million..

Wed, 12/23/2015 - 10:22 | 6956080 praxis
praxis's picture

I think this is a good opporutnity for President Obama to save the day by tasking Congress with some sort of emergency appropriations legislation that will bail out PR.  Paul Ryan is certainly ready and willing as is most of the Republican controlled Congress.  Thanks Cuckservatives!

Wed, 12/23/2015 - 10:26 | 6956089 Buster Cherry
Buster Cherry's picture

Those poor people.

Can't we just send them some ATM's??? I see them everywhere around here.

Wed, 12/23/2015 - 10:30 | 6956098 youngman
youngman's picture

If its only a partial payment..you can bet the unions will get paid first..its the socialist way

Wed, 12/23/2015 - 10:36 | 6956105 Lorca's Novena
Lorca's Novena's picture

Puerto Rico, i kinda forgot about that island as I dont travel near Catalina much these days...

Now, was this the island that was going to tip over according to that democrat congressman? Anyhoo, I think Disney should buy the place and turn it into half pirate colony, and half star wars colony. Virtual tourism bitchezzzzz

 

 

Wed, 12/23/2015 - 10:41 | 6956119 JRobby
JRobby's picture

How about half Quest For Fire Themed, half The Walking Dead?

Wed, 12/23/2015 - 11:26 | 6956250 FrankieGoesToHo...
FrankieGoesToHollywood's picture

Perhaps "Road Warrior" after they burn it down?

Wed, 12/23/2015 - 11:27 | 6956254 cheech_wizard
cheech_wizard's picture

Actually it was Guam (but you knew that already), but think of all the problems that would be solved if Puerto Rico could be made to flip over. After a good ocean cleansing, it will be rather pristine, and more importantly, cleared of humans.

 

Wed, 12/23/2015 - 10:45 | 6956129 Truth Eater
Truth Eater's picture

“To make a total payment will be almost impossible,” the Governor said.

 

ALMOST impossible.....  means it is possible.  What the weasel is saying is that you just have to know how to squeeze him to make the payments appear.  It is the connivers' method of testing the waters and see what blowback happens.  if nobody threatens him, he keeps his fat bonuses.

Wed, 12/23/2015 - 11:42 | 6956315 Government need...
Government needs you to pay taxes's picture

He should speak to Harry Reid.  That exercise equipment can be dangerous.

Wed, 12/23/2015 - 10:53 | 6956149 Salzburg1756
Salzburg1756's picture

Welcome to the American way!

Wed, 12/23/2015 - 11:51 | 6956353 hangemhigh77
hangemhigh77's picture

God knows they deserved the 120 mil bonuses.

Wed, 12/23/2015 - 12:01 | 6956385 Rikky
Rikky's picture

Anyone involved in cutting these debt deals should be tried as a criminal and put on trial and jailed.  Why do these politicians and their cronies who put together deals based on assumptions that will never happen not have any more culpability than not getting re-elected?  They're liars and swindlers at best and thieves and crooks at worst.

Wed, 12/23/2015 - 12:26 | 6956459 headhunt
headhunt's picture

I have dealt with PR in the past, it is a shit hole run by some of the dumbest leftists on the planet.

Their laws are designed to punish the producers and in particular any company attempting to do business with anyone on the island.

Fuck them and their shit hole of an island and government.

 

If the leftists running continental USA are not replaced this next election, take a trip to that island paradise to see Americas future in 5 years.

Wed, 12/23/2015 - 12:30 | 6956477 QQQBall
QQQBall's picture

Quick, pay the 2016 bonuses a year early! 

Wed, 12/23/2015 - 13:56 | 6956922 Kagemusho
Kagemusho's picture

"When the avalanche begins, it is too late for the pebbles to vote." - Ambassador Kosh, Babylon 5

Consider this the first pebbles of the avalanche.

Wed, 12/23/2015 - 14:34 | 6957088 dorane
dorane's picture

I remember Pres Ford proposing statehood way back - 76?

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