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Puerto Rico To Default On Some Bonds January 1 - Live Feed

Tyler Durden's picture




 

Puerto Rico governor Alejandro Garcia Padilla is set to address the island's debt problem at a press conference on Wednesday.

  • PUERTO RICO SAYS IT WILL DEFAULT ON SOME DEBT DUE JAN. 1
  • PUERTO RICO TO MISS $1.4 MILLION DUE ON PFC BONDS DUE JAN. 1
  • PUERTO RICO TO MISS $35.9 MILLION DUE ON PRIFA BONDS
  • PUERTO RICO TO MAKE JAN. 1 GENERAL OBLIGATION DEBT PAYMENT

Nearly $1 billion comes due on Friday, some $330 million of which is GO debt. Because a full payment is next to impossible, Padilla must decide who gets paid and who doesn't. Live feed:

And the reaction in the monolines:

*  *  *

Background

In what’s starting to feel a bit like the Greek saga that unfolded over the summer, Puerto Rico is facing another “D-Day” on January 1 when nearly $1 billion is due to creditors. 

For those unfamiliar with the story, the commonwealth is struggling to crawl from under a debt pile that sums to about $70 billion but has thus far been unable to wrench concessions from Congress on restructuring in bankruptcy.

Earlier this month, the island struck a deal with the monolines that will let a previously agreed restructuring for around $8 billion in PREPA debt go ahead, and while some hope that could serve as a kind of template for the rest of Puerto Rico’s obligations, analysts and government officials alike think that’s unlikely given the complexity involved. 

On December 1, Governor Alejandro Garcia Padilla used a revenue clawback mechanism in order to make a $354 million payment. The end-around effectively allowed Padilla to divert funds from other agencies that have issued bonds in order ensure the government could make good on its GO debt. A default on the GO portion (around $330 million) of what comes due on Friday would trigger a wave of messy litigation and is a situation Padilla wants to avoid at all costs. 

One source with GO debt exposure who spoke to Reuters said debtors usually advise creditors ahead of time when they plan to default, and Puerto Rico had not indicated a default to GO creditors. 

But given the fact that Padilla indicated earlier this month that making the full payment at the first of January would be all but “impossible,” someone isn’t going to be getting their money. 

Height Securities’ Daniel Hanson - who last month warned of social unrest if the government stops making payroll - says the island will likely miss payments on $35 million in Infrastructure Finance Authority (PRIFA) bonds, $1.4 million in PFC bonds, as well as possibly $91 million on bonds at its buildings authority (PBA).

For its part, Ambac (which insures Puerto Rico's debt) now says the revenue clawbacks the island used to make the December 1 payment are "illegal." According to Bloomberg, the insurer is now demanding taxes received in fiscal 2016 up to the statutorily required limit of $117m be moved to Sinking Fund and says as much as $94m in Rum Taxes securing PRIFA bonds were diverterd before governor’s order, a contention Padilla denied in today's presser.

Perhaps Padilla put it best earlier this month when he said the following: "...the vast number of creditors with differing interests across all issuing entities [will] result in negotiations that are lengthy, costly and chaotic."

 

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Wed, 12/30/2015 - 14:04 | 6978831 knukles
knukles's picture

Collateral and Cross-Default
I knew you knew the key questions.

Padilla 2016

Wed, 12/30/2015 - 14:04 | 6978836 Tom Servo
Tom Servo's picture

I thought they were "fixed" a month ago!!!

 

Wed, 12/30/2015 - 14:06 | 6978840 knukles
knukles's picture

My dogs were fixed seven years ago.
Believe me, from personal experience, Nothing's Ever Fixed in Puerto Rico

Wed, 12/30/2015 - 14:08 | 6978863 Deathrips
Deathrips's picture

ROSALIA
Puerto Rico,
You lovely island . . .
Island of tropical breezes.
Always the pineapples growing,
Always the coffee blossoms blowing . . .

ANITA
Puerto Rico . . .
You ugly island . . .
Island of tropic diseases.
Always the hurricanes blowing,
Always the population growing . . .
And the money owing,
And the babies crying,
And the bullets flying.
I like the island Manhattan.
Smoke on your pipe and put that in!

OTHERS
I like to be in America!
O.K. by me in America!
Ev'rything free in America
For a small fee in America!

 

RIPS

Wed, 12/30/2015 - 14:20 | 6978917 Bastiat
Bastiat's picture

It's not a "default" unless the writers of credit default swaps say it's a "default."  If the debtor says something like:  "Someday, I'll pay some of it back, if you give me the money," it's not really a "default."  I think that's how it works.

Wed, 12/30/2015 - 14:25 | 6978948 Barnaby
Barnaby's picture

Hey, Puerto Ricans can sell an abandoned base of ruthless shelling and bombardment as a vacation getaway, maybe they've learned a bit from us Yanks. Vieques: get a nuclear tan!

Wed, 12/30/2015 - 14:25 | 6978949 LowerSlowerDela...
LowerSlowerDelaware_LSD's picture

They obviously need a MUCH larger government and for the government to be giving away WAY more free shit.  Krugman says that that is a guaranteed path to prosperity.

Wed, 12/30/2015 - 14:45 | 6979001 ThaBigPerm
ThaBigPerm's picture

Warburg Pincus ever able to dump their majority stake in the largest insurer of this paper?

*correction* - not majority, just largest shareholder

Wed, 12/30/2015 - 16:06 | 6979279 Welfare Tycoon
Welfare Tycoon's picture

"We defaulted some folks...."

Wed, 12/30/2015 - 16:37 | 6979393 Theosebes Goodfellow
Theosebes Goodfellow's picture

Dammit Welfare, you stole my thunder!

"Some bonds got defaulted..."

;-)

Happy New Year!, (or at least better than the last one...)

Wed, 12/30/2015 - 17:44 | 6979664 NuckingFuts
NuckingFuts's picture

Myself and the wife and kids are in PR right now, flew in in Christmas Eve leave on New Year's Day. It's kick ass if you know what to expect. 3 bedroom 3 bath house with private pool and a pool table on the patio in a gated neighborhood. $160 a night, can't beat it. Yeah it's dirty and you have to watch your shit but my 16 and 8 yo are having a blast. Large lunch today with beers for the Mrs. and I, soda for the kids... $16.50. Mid 80's everyday. Just stay away from the large cities, who wants to vacation around Americans anyway? They embarrass me. Today struck up a conversation with a local guy my age (mid,late 40's) who has 2 sons in the USMC he was impressed we were hanging with the locals and not at some lame ass resort where the gringos go. Anyway, it's cheap and pleasant. It is 2nd world Caribbean but hey it beats the Midwest this time of year.

Wed, 12/30/2015 - 20:53 | 6980246 Keyser
Keyser's picture

Hmm, I wonder if this budget showfall was a topic of discussion when the PR gubbermint paid out over $120,000,000 in Christmas bonus' just last week... Fuck 'em, they are all multi-generational welfare dependents... Time to repossess the entire island, put the lying government in a boat and drag them out to sea without a paddle... 

Wed, 12/30/2015 - 16:06 | 6979282 DaveyJones
DaveyJones's picture

(cue the music)

"I wanna forgive in America..."

Wed, 12/30/2015 - 16:14 | 6979322 Al Tinfoil
Al Tinfoil's picture

Puerto Rico Finance Minister explains their Plan B

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

Wed, 12/30/2015 - 14:05 | 6978843 stacking12321
stacking12321's picture

well at least the government employees got $120m in christmas bonuses, so they got that going for them, which is nice.

Wed, 12/30/2015 - 14:16 | 6978897 youngman
youngman's picture

Yes no cuts in the bonus pool...in fact I bet it was moe than last year

Wed, 12/30/2015 - 16:11 | 6979304 BurningFuld
BurningFuld's picture

Well they did have to spend a lot of time going over how they were going to default.

Wed, 12/30/2015 - 19:06 | 6979907 Calmyourself
Calmyourself's picture

You heard the man without the money there would be "social unrest", no one wants to piss off a Puerto Rican mailman..

Wed, 12/30/2015 - 14:06 | 6978855 Deathrips
Deathrips's picture

Printing presses never run out of other peoples money to devalue...unless you are the example to be set.

 

IRS is there...they may get what detroit , baltimore and chicago wont.

 

RIPS

Wed, 12/30/2015 - 14:35 | 6978976 Xscream
Xscream's picture

Nothing ever gets fixed...kick the can down the path save a few more days,months,years before the unaviodable day of default 

Wed, 12/30/2015 - 14:14 | 6978884 Newbie lurker
Newbie lurker's picture

I'm alarmed. Will this adversely affect Superbowl Cincuenta in anyway?!?!?!?!

Wed, 12/30/2015 - 14:53 | 6979025 rejected
rejected's picture

As the numbers of this debacle are greater than two digits it's possible most football fans will miss the enormity of the situation. 

Wed, 12/30/2015 - 15:09 | 6979079 Newbie lurker
Newbie lurker's picture

Maybe people would understand the magnitude if they converted all of the dollar figures to Roman numerals. 

Wed, 12/30/2015 - 14:04 | 6978835 eyesofpelosi
eyesofpelosi's picture

What would Fred Sanford have to say about this?

Wed, 12/30/2015 - 14:06 | 6978848 Wulfkind
Wulfkind's picture

"I'M COMIN' TO JOIN YA, HONEY !"   (in this case Honey is Greece)

Wed, 12/30/2015 - 14:19 | 6978913 Jtrillian
Jtrillian's picture

Are we witnessing a pattern here?

1. Private corporations create deals with respective governments that obligate them to a debt they will never be able to pay off. 
2. Governments default on debt.
3. Corporations move in and create a corporate fascist state (as is happening in Greece) AND IT'S ALL LEGAL. 

There is an aweful lot of fascism manifesting itself in the world today and it's only getting worse. 

 

Wed, 12/30/2015 - 14:40 | 6978996 Chupacabra-322
Chupacabra-322's picture

A Global Totalitarian Authoritarian Fascist Militarized Police State. Milton Friedman's wet dream but on a Global Scale. Chile was just a trail run.

Wed, 12/30/2015 - 14:07 | 6978858 knukles
knukles's picture

Sheeet!  I hopes dey still gets der Bammyphones K, yo!

Wed, 12/30/2015 - 15:56 | 6979245 Freddie
Freddie's picture

Puerto Rico = a more corrupt and more hispanic version of NYC.  They have plenty of Guzmans aka tribe members.

Wed, 12/30/2015 - 14:04 | 6978837 Wulfkind
Wulfkind's picture

This was all known from the beginning. Just like Greece. Now the only question is who gets to own Puerto Rico and who is going to pay for it.

Wed, 12/30/2015 - 14:07 | 6978857 i_call_you_my_base
i_call_you_my_base's picture

Not a question. The US owns it and the US taxpayer will pay for it.

Wed, 12/30/2015 - 14:07 | 6978861 knukles
knukles's picture

LOL

Wed, 12/30/2015 - 14:17 | 6978901 Motorhead
Motorhead's picture

Sounds like the taxpayers should own it, then, hehe.

Que fucking lastima.

Wed, 12/30/2015 - 16:22 | 6979343 stocktivity
stocktivity's picture

You and I

Wed, 12/30/2015 - 14:05 | 6978841 Philo Beddoe
Philo Beddoe's picture

No hot latina babe pic? 

Wed, 12/30/2015 - 14:42 | 6978984 LowerSlowerDela...
LowerSlowerDelaware_LSD's picture

They could easily balance the budget while laying down...

Wed, 12/30/2015 - 14:05 | 6978845 arbwhore
arbwhore's picture

Never mind.. full faith and credit... sell physical assets and buy USD's and T's... it will never happen here... so forth and so on...

Wed, 12/30/2015 - 14:06 | 6978847 Mr. Schmilkies
Mr. Schmilkies's picture

Dios mio!  Por favor Tio Sam, dame sus dinero ahora!

Wed, 12/30/2015 - 14:06 | 6978856 SheepDog-One
SheepDog-One's picture

A couple million here and there? Thats just a rounding error on an avg daily Wall St trading desk.

Wed, 12/30/2015 - 14:09 | 6978864 lasvegaspersona
lasvegaspersona's picture

Who would have ever lent money to PR?...or any government...ever...?...why...?

Because it is the law! Various entities must hold the very safest of assets...you know...government bonds.

Once again the politics of the monetary system rears its ugly head. The people want their stuff and so governments give it to them. Then the system goes sideways and the currency itself goes bad. This cycle is now almost a millennia old. Avoid it. Save your excess wealth in something real. Gold is best but if you are really wealthy and can't source enough gold...well, if you are in that category you would not be listening to me.

Wed, 12/30/2015 - 14:10 | 6978872 aliki
aliki's picture

but, but, but ... THERE'S YIELD!!!

Wed, 12/30/2015 - 14:59 | 6979042 NotApplicable
NotApplicable's picture

So... you're saying this debt is held by all of those conservative pension/insurance managers?

Wed, 12/30/2015 - 14:12 | 6978879 surf0766
surf0766's picture

socialist wet dream default and spend it all over again

Wed, 12/30/2015 - 14:16 | 6978895 centerline
centerline's picture

Ah fuck it. Put it on my tab.

Wed, 12/30/2015 - 14:16 | 6978898 ZeroPoint
ZeroPoint's picture

Puerto Ricans are about get Greeced hard in the ass.

Wed, 12/30/2015 - 14:16 | 6978904 directaction
directaction's picture

Print more and move on to the next one. 

Wed, 12/30/2015 - 14:17 | 6978909 CHoward
CHoward's picture

But the government employees got their yearly bonus, so everything is cool, right?

Wed, 12/30/2015 - 14:23 | 6978939 Winston Churchill
Winston Churchill's picture

Head of the trough, shame their pensions just went poof.

Wed, 12/30/2015 - 14:24 | 6978915 buzzsaw99
buzzsaw99's picture

Ambac, lulz

Their mouth has been writing checks their ass can't cash methinks. That's okay, they'll find (or create) some loophole and not have to pay. They're good at that.

Wed, 12/30/2015 - 14:18 | 6978916 Lady Jessica
Lady Jessica's picture

Un cisne negro?

Wed, 12/30/2015 - 14:20 | 6978923 Barrack Chavez
Barrack Chavez's picture

Can't wait to hear how Moodys and S&P have put Puerto Rico on credit watch for possible downgrade... oh wait! they are going to print IOU's? Well then, clearly that would make them investment grade, just like California

Wed, 12/30/2015 - 14:25 | 6978943 buzzsaw99
buzzsaw99's picture

If the squid owns any they will get Upgrayedd. The double d is for a double dose of imf pimpin'.

Wed, 12/30/2015 - 14:22 | 6978936 Fiscal Reality
Fiscal Reality's picture

The Boys at AMBAC are Wall Street players. They knew the risks when they insured this steaming, stinking pile of bovine defecation known as Puerto Rico bonds. Memo to El jefe De Puerto Rico, tell the boys at AMBAC "Quien paga? Usted paga, Gringo!" Thats why Bonds are insured and thats why you get your premiums!! Let Wall Street play "patata caliente" with AMBAC.   www.ambac.com

Wed, 12/30/2015 - 14:24 | 6978945 The Bell Rang
The Bell Rang's picture

Bullish !!!

Wed, 12/30/2015 - 14:27 | 6978956 Barnaby
Barnaby's picture

What I want to know is whether it's PC to diss PR, or do you need a PR team to remain PC when you call the island PR?

WTF is going on?!

Wed, 12/30/2015 - 14:40 | 6978995 Omen IV
Omen IV's picture

why would anyone put 5 cents into PR when Cuba is there with a clean Balance Sheet and claims of 100's of Billions in $$$$ against the USA for illegal sanctions which will turn into public works expenditures - modern systems no legacy antiquated systems to support and pay for - everything brand new to come

Anything you want from PR can be had in Cuba cheaper and better managment

SHUT DOWN PR and let it turn to chaos - come back in ten years when there is no one left

Wed, 12/30/2015 - 14:53 | 6979024 Dragon HAwk
Dragon HAwk's picture

Hey I got a Solution..  we kick all the Puerto Ricians off of the Island, and rename it..

 take a while for the smell to clear, but somebody will Buy It

 

yeah yeah i know racist son of a Bitch... haven't been knifed in a while have you.

Wed, 12/30/2015 - 15:00 | 6979043 Soul Glow
Soul Glow's picture

bullish

Wed, 12/30/2015 - 15:04 | 6979058 Mr. Cynic
Mr. Cynic's picture

And in other news, Twizzlers candy still sucks.

Wed, 12/30/2015 - 15:06 | 6979065 idontcare
idontcare's picture

.... and why this isn't a big deal?   Let's see - oh yeah, most of the debt issued by PR prior to 2008 which WAS AAA is insured by AGMC.  If any of these bonds go belly up, the only hurt party is Berkshire Hathaway.

Wed, 12/30/2015 - 15:14 | 6979099 pupdog1
pupdog1's picture

Mrs. Sees is Buffett in drag.

Wed, 12/30/2015 - 15:12 | 6979092 pupdog1
pupdog1's picture

That entire island is Free Stuff Army.

This is why Obola will bring all his ilk here.

'Course, that will piss off 100,000 of Obola's Syrian guests that think they have FSA dibs.

Wed, 12/30/2015 - 15:32 | 6979147 eyesofpelosi
eyesofpelosi's picture

Fred Sanford to Julio:

 

"El payoh yoh debtoh amigo..."

Wed, 12/30/2015 - 16:06 | 6979283 jcdenton
jcdenton's picture

ZH, Tylers, I do scratch my head ..

You are apparently clueless about Lee Wanta (some say the preeminent expert on macroeconomics). But on top of that, you are appear to be clueless of the likes of Bill Holter and Jim Sinclair. Metals brokers know everything. They have to. Their competition is other commodities. Stocks, bonds, real estate, precious jewels, collectables, currencies, etc.

Do ask Lee Wanta why he personally possesses 2000 metric tonnes of gold bullion. Purchased, pennies on the dollar from the former USSR. At current market price, in excess of $90 billion. Which outside of his total net worth of 32.8 TRILLION (none of it paper wealth) still makes him richer than Bill Gates, or any Arab sheik of your choice. Or any combination thereof.

Anyways, back to Holter. If you pay attention to his most recent conversation with Greg Hunter (who has had the pleasure of conversations with all the big guys [with the exception of Wanta to date]), Hunter mentions PR, and how missing one payment coming up could well be the first domino to drop. Holter, does not even blink ..

http://usawatchdog.com/2016-prediction-collapse-caused-by-fraud-debt-bil...

The key quote in this conversation (besides the PR quip) is probably this ..

You just have to ask yourself the question. If someone counterfeited a billion shares of IBM stock and sold that into the market, what would happen to the price? It would crash. That’s what they’ve done with gold. It’s the same thing. It’s fraud. They have counterfeited gold with paper.

 

Happy New Year everyone ..

In addition to Sinclair's Be Prepared, keep yourself furthered armed. When Sinclair here speaks of disruptions, lasting up to 30 to 60 days, Gibby (for Lee Wanta), Dr. Jame's et al likewise are talking about the adjustment and/or transition period coming (3/24/15 teaser and full discussion.)

https://app.box.com/s/hfgvcqg7gqh7i27at6sv53ywu87lwarp (Read Me First)

http://www.veteranstoday.com/2014/07/30/the-coming-return-of-the-real-us...

Wed, 12/30/2015 - 16:39 | 6979407 shantyman
shantyman's picture

Sinclair is an asshole, charletan, cheat, fraud and liar...hows is your TRX doing?

Wed, 12/30/2015 - 16:07 | 6979287 Bemused Observer
Bemused Observer's picture

Oh for the love of GOD DO IT ALREADY! JUST FUCKING DO IT! I'm SO SICK of hearing this "We're gonna default...We swear, we'll do it...We won't make this payment...ok, we'll make THIS payment, but we won't make the next one...We swear..."

Shut UP! You, and Greece, at least a dozen other nations, the US Congress, college students, tens of thousands of municipalities across the country, most of the states, all of the banks, the majority of households and almost every single individual on the PLANET owes SOMEBODY SOMETHING that they cannot afford to repay. What difference is it if the debt is 100 billion, or 2 goats? If you owe 2 goats but have no goats it's the same as not having 100 billion.

It's DEBT itself that is the problem, not the amounts of debt. The amounts only put the stories into the news, because the numbers are so mind-blowingly BIG. But make no mistake about it, THIS IS WHAT DEBT LOOKS LIKE.

We can complain about Puerto Rico, and Greece, etc, not living within their means, whatever. But when you make minimum payments on your Visa card, and roll the rest over to the next billing cycle, YOU are Greece...YOU are Puerto Rico. You are doing, on a micro-scale, exactly what these folks did, and it got away from them. Just like it will eventually get away from you, which you fear it will in your heart of hearts. ALL people with debt fear not being able to service it, of having it get out of control. They swear they will 'catch up' next month, but of course they never do, something always comes up.

Well, something came up for Puerto Rico, and now they are in trouble. NOT because they were any more irresponsible than any of us as individuals, but because THIS IS WHAT DEBT ALWAYS LEADS TO!

They go down harder and faster because of their great size, but make no mistake about it fellow debt-slaves. We are ALL going down the same rat-hole. We might like to differentiate between 'good' debtors and 'bad' debtors, but in fact thee is no way to responsibly handle debt, therefore there can BE no irresponsible debtors. They can either pay, or they can't, and a sense of responsibility won't put a nickel into anyone's pocket. Nor do creditors accept it as payment...:-)

Since there IS no way to responsibly 'handle' debt (except to avoid it altogether), any widespread use of it in your economy would be foolish. But to BASE your economy on it, create your currency with it, is beyond stupid. Stupid on a scale hard to wrap your mind around...

When I say "your economy", it's because I don't feel like I'm part of this economy...I'm on the outskirts, drawn along against my will by forces too great to resist. However, all they can do is drag me along, they can't make me carry anything for them. So I avoid their banks, their credit cards, their 'loans', their payroll taxes, sales taxes, their consumer goods...I pay the unavoidable, but that's it, and I challenge when I can. I will NOT contribute, it will ALWAYS cost you way more to hold me than you will ever get out of me.

What a dumb-ass economy this is! It would be almost funny to read about a country doing these things, but to have to LIVE through it is NOT entertaining...*sigh* We all get our brief turn on this ride called Life, and these people are wasting MY limited time with their bullshit!

Wed, 12/30/2015 - 16:39 | 6979404 Jacksons Ghost
Jacksons Ghost's picture

Honest money would fix this. What are the chances they bring it back? "On a long enough timeline...."

Wed, 12/30/2015 - 17:23 | 6979602 Dickweed Wang
Dickweed Wang's picture

Because a full payment is next to impossible, Padilla must decide who gets paid and who doesn't.

 

Yeah right . . . . his decision on "who gets paid" and who doesn't will be totally objective . . . no politics involved in that decision whatsoever.

BOHICA!!!

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