Puerto Rico Says Will Default Tomorrow, Begs Congress For Help "Or Else Crisis Will Get Worse"

Tyler Durden's picture

Update: PR Governor Padilla has spoken...


And of course, demands a bailout...


And then threatens...


As we detailed earlier, It's D-Day in Puerto Rico. As Bloomberg reports, investors are finding little comfort in the Puerto Rico Government Development Bank’s efforts to strike a last-ditch agreement with creditors to soften the blow of a default this weekend. The bonds that mature today (May 1st) have crashed to just 20c (disastrously below the 36-cent recovery rate the commonwealth proposed in March).

It appears investors are not buying what Puerto Rico is selling and prefer to dump the bonds than hold out in hope of a 'deal'...

A default on the $422 million due today is "virtually certain," S&P Global Ratings said April 11.

No matter which route Puerto Rico takes, credit-rating companies see a default as inevitable. Moody’s Investors Service analysts said last week that any non-payment, even if it’s agreed to by creditors, constitutes a default in their eyes. S&P Global Ratings said a distressed-debt exchange or temporarily withholding interest is synonymous to default.

But as Bloomberg reports, Puerto Rico said its Government Development Bank, which is operating in a state of emergency to preserve its dwindling cash, reached an agreement with some credit unions to delay $33 million of bond payments as the commonwealth rushes toward a potential historic default.

The pact only affects a portion of the $422 million that the bank owes on May 1. The GDB will exchange the $33 million in bonds for new debt that will mature May 1, 2017, Governor Alejandro Garcia Padilla’s administration said in a statement Friday. The terms of the agreement are available to other credit unions, called cooperativas, and investors, according to the statement.


“Apart from this private exchange, GDB continues to negotiate a potential transaction related to an exchange of all of GDB’s bond indebtedness, which would require the participation of all creditors of GDB (including the cooperativas),” the administration said in the statement. “The private exchange does not affect, or take the place of, those ongoing negotiations.”

The bank is still negotiating a possible debt exchange on all of its bonds, which would require the participation of all its creditors, according a the statement. The GDB, which structured the island’s debt sales, has $5.1 billion of debt. The governor’s office said Garcia Padilla will speak to the commonwealth in a televised address Sunday at 5 p.m. New York time.

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ShortTheUS's picture

"The governor’s office said Garcia Padilla will speak to the commonwealth in a televised address Sunday at 5 p.m. New York time."

Depositor Bail in?

Kissy Ass's picture

Hey, it's too hot to work.

Relax. Have a Seviche, momosa, fuck and make some more democRATS.

Oh vey, funny how the latins love the jews.

jay35's picture

A default on those constitutionally guaranteed bonds would be the first by a state-level borrower since Arkansas missed payments on its debt in 1933.

source: http://www.bloomberg.com/news/articles/2016-05-01/puerto-rico-will-defau...

That says it all.

NidStyles's picture

Who cares, they are not a state. If they want the privileges of being a state they need to join the Union, and start paying full taxes.

jay35's picture

Point is they are treated like one when it comes to borrowing, so this is significant. Just another evidence that the economic situation is not recovering, it is getting worse and mirrors the 1930s depression era that took a war to bring us out of it just like TPTB are working on today.



Mr. Bones's picture

Why aren't they just indefinitely in arrears like practically every other government to welch on a debt in the last decade?

Bumpo's picture

PR figured if they did nothing they would be bailed out like the banks.

nuubee's picture

If all the "college students" can get bailed out by Bernie, then why not Puerto Rico?

Free shit is a bailout by another name. There is no way to end the bailouts other than to refuse to accept government money.

LowerSlowerDelaware_LSD's picture
LowerSlowerDelaware_LSD (not verified) nuubee May 1, 2016 8:32 PM

Qiuck, PR... Raise the minimum wage to $15/hour.  That (fewer jobs) will "fix" everything.

Muddy1's picture

Where is Brad Sherman???????

We need tanks in the streets of PR, declare martial law!!!!!!!!!!

CheapBastard's picture

moar evidence of Hussein O'Bama's robust recovery.

VinceFostersGhost's picture




Time to walk like an Icelander.....Caribbean style.

Kissy Ass's picture

I like to solve problems. Why not extinguish 1 Puerto Rican welfare recipient for each US Dollar not repaid on time?

FreeMoney's picture

The problem in PR begins with debt.  They have had budget deficits forever, and even allowed there budget to grow while their population was shrinking.  There is no solution for any soceity with too much debt that will be solved with more debt, or can be solved without having a budget surplus.

Some of the story can be seen here, where the White House is trying to others to support a bailout.


I suspect PR will be left to collapse so the crisis created will be the chant for Illinios. 

True Blue's picture

Good, let them collapse.

Their government did a 'clawback' on bond payments in the 4th quarter last year and used the money to play Santa Claus, giving out $120 Million in government employee bonuses.

Hell with collapse, let them BURN.

John Kich's picture

This is Donald Trump's most shocking statement yet,

However the mainstream media isn't saying a word about it!

What are they really trying to cover up?


Tall Tom's picture





Actually they have nothing to lose.


I hope you have your emergency tube of Vaseline ready as they are set to ream everyone in the arse.


They are the ones who are fucking you. They are not saying it at all.  They are DOING IT.


In fact that default may be just enough Activation Energy, the energy required to initiate the Nuclear Fission so that the uncontrolled chain reaction of defaults happen in the Derivatives Market....a Weapon of Financial Mass Destruction.


So let the Credit Event be declared with the consequential rush to cash out of those Credit Default Swaps.


Are good are your counterparties, Four Chan?


Will they make good on their promises to stand and deliver?




Nothing makes me happier than to visualize the implosion of the Global Financial Markets.


And as for your paper wealth??? It will be worthless.


Sleep well.

ATM's picture

No one knows what the spark will be to set off the debt explosion. Migt well be a tiny, worthlees island in the Carribean not paying a miniscule amount of interest.

Paveway IV's picture

"...PR figured if they did nothing they would be bailed out like the banks..."

They will be. They have to be. 

Banks are crack dealers. As long as there's plenty of customers (or potential customers) then they can count on printing more money to lend out. You didn't think the government actually has any say in that any more, did you? The banks saturated the market. Demand destruction. They can't even get rid of the stuff they have, hence NIRP.

The only way for banks to stay in business relative to Puerto Rico or any other borrower on the planet is to lend them more money to pay their current unpayable debt. They can't do that because Puerto Rico used up all their U.S. government backing on their other worthless bonds. 

The solution - which is always the solution - is to get secret, extra-special permission just this once for the U.S. Government to back some "Oopsie! We Promise Not to Do it Again" bonds. How do you think the German banks were able to keep re-ass-raping the Greeks every time they were going to default?

Puerto Rico is like a mini-Greece to the U.S., and U.S. citizens will pick up the tab, just like the German citizens are/will get fucked for Greece's debt.

Why? 'Cause crack dealers gotta deal crack. That's what they do. 

Bumpo's picture

I would normally say you're most likely right. But at some point, winners and losers will be chosen. Could this  be one of those moments?

Paveway IV's picture

A German factory worker sat at the kitchen table reading his newspaper one morning a decade ago about Greece and asked the exact same question. 

"They can't keep this shit up forever! Our German banks can't be so fucking stupid as to loan them even MORE money, can they? Who will guarantee their debt??" 

That's how I see the probability that the game will actually end tomorrow for Puerto Rico. I give the banks at least a decade or two more to milk this one, while the ass-raping for the U.S. taxpayers is delayed for the same amount of time. It's a win-win for the banks and .gov

If you think a junkie is dangerous when you cut them off, then you've never seen a hard-core crack dealer that suddenly believes his market might be taken away from him. 

conscious being's picture

A decade or two? Holy mole(ay) sauce, Paveway. You are right about so many things, I hope you are wrong about this one. You're spoiling all the fun, harshing the buzz az it were. Ok, maybe, probably they bailout PR again, but there is external pressure. Sick of dollar enabled aggression, the Chinese, Russians and others are walking away, running away from the $, making it's use in international trade settlement less and less useful. Most dollars are held offshore. Less useful, can't use them offshore, then Dollars will find their way home. Domestic supply will increase leading to price inflation and last but not least, there is the flip side to the bankster money scam. Jack up rates. Force defaults and seize the collateral. But keeping this freak show going another twenty years? I don't think so. I sure hope not.

BringOnTheAsteroid's picture

This will keep going on until the citizens of the United States say enough ie enough.

What does saying enough is enough really mean though. I just typed the phrase twice and nothing has changed.

It means not accepting US dollars as terms of payment any more.

It means not paying taxes any more.

If taxes are deducted straight from your wage then it means not showing up to work any more.

None of the above will happen.

So what remains is an incredibly long drawn out process that leads to war or a currency crisis or both.

Who knows, though. It may only take one person to front the steps of the white house and pronounce their abandonment of the system to set in train an avalanche.

There simply has to be a critical mass of people at the point they have nothing to lose. That critical mass is surely approaching as the pyscopaths simply have no idle switch let alone off switch.

It's the same it's ever been.

How quickly we forget the French revolution.

Tall Tom's picture





This is an Election Year. Congress will not appropriate any funds.


However I hear that Belgium is interested in buying some Junk Bonds...LOL

indygo55's picture

You don't think theres any corrupt Puerto Rican politicians involved in this thing, do ya?


Nooooooooo. No way.



BeerMe's picture

A war isn't what ended the depression. It was finally doing away with FDR policies of spending.

Tall Tom's picture




The USA did not stop that at all..


In fact we continued with those spending policies to this very day.


For Eighty Years we have been sucking on Government teat.


From Public Works Projects as the Interstate Highway system. to Medicare...to Defense Spending...

Antifaschistische's picture

I don't understand why you need a "deal" with creditors to default.  I also don't understand why you have to announce it...The bank will find out soon enough after they open all the mail, and your check...ain't in it.   No big deal...wait for THEM to call, and tell them you'll send them 1/2 of the payment, if they erase 1/2 of the total debt.  Otherwise...you're changing your phone number.

fockewulf190's picture

I wonder how many derivatives are out there just waiting to be triggered by a PR bond default...and if the payee(s) are liquid enough to pay out such bets.

Farqued Up's picture

I hope they defect to Cuba, better yet, Venezuela.

Holy Roller Empire's picture

Ya, but better off if we sell PR to Cuba and let them run it.

Huh Reeeally's picture

Looking a little closer to home, many states hold PR bonds in pension funds etc., this is going to get interesting.

neidermeyer's picture

We shouldn't interfere ,, the hedgies need to lose every once in a while... after all they were stupid enough to give money to Ricans not me...

Scuba Steve's picture

Or ... do what Paulson did and buy some other discounted beautiful resort properties in the neighborhood, move some operations on island and be ready for the bond carnage to pounce on the carion that will be laying around everywhere.Its a a good way to hedge your bond defaults that are coming ... grab the physical and burn the paper.

Hey, thats what ZeroHedgies do :)

Stay Physical bitchezzzz.


knukles's picture

So why can't Puerto Rico use their cash to pay Venezuela to print more Venezuelan Bolivars and then just dump them on the spot Bolivar (nonexistent to deep shit) market for dollars to pay the interest on the Puerto Rican Debt?
BTW, debt denominated in anything issued by Puerto Rico should be termed "Spic and Spans" after the famous Puerto Rican window washers from NYC.

Theonewhoknows's picture
Theonewhoknows (not verified) This Might Hurt May 1, 2016 4:31 PM

Finally a healthy default!!! IT's not that uncommon and way better than a slow destruction of currency to shrink the debt. See those two ways out of debt compare here: http://independenttrader.org/trader21-lecture-presented-at-fx-cuffs.html

Stroke's picture

Maybe Paul Singer will buy them.......& then he can capture a ship....and then

Buck Johnson's picture

I do to, they think it won't affect the US but it will.


Kirk2NCC1701's picture

Puerto Rico, do you Feel the Burn! ?

Illusory logic's picture

I smell the work of an Economic Hit Man.  Don't blame the victim here, and that's PR and the USA.

Death to the money changers! - K. Sousa

SilverDoctors's picture

We flew in to San Juan this weekend to observe the situation first hand.  While the situation is bad, its not Venezuela dire.  Amazingly, the average Puerto Rico citizen continues to go about their business with more kindness than you'll find in an entire city block stateside. 

In other news, today marks the 5 year anniversary of Silver's May Day Massacre.  May 2016 be the year we bathe in the blood of the shorts!!! 

zeropain's picture

On the plus side sex tourism can compete with thaikand if they are smart about it.  Us men like big asses now.

knukles's picture

Oh, I can just see that now.  You know, PR women are like Mexican women.  One moment you're drooling over this smashing supermodel looking fine chicklet of a gal and presto, like Cinderella after midnight she turns into one of the Hags from Macbeth with all sorts of rolls of fat, noxious necrotic smells, moles sprouting hair like landmine feelers and the like making you wish that you'd been at Sharon Tate's place looking for Linda Ronstadt's diet pills that one evening. 

lunaticfringe's picture

Why doesn't Mr. Yellen just print up some of that shit and give it to them? Oops, forgot. The whole point of indebtedness is to seize the collateral. Paper for an island.

Paveway IV's picture

"...The whole point of indebtedness is to seize the collateral. Paper for an island..."

Nope. That's killing the host. The whole Ponzi revolves around banks figuring out how to permit their victims to borrow more and more money from them even though their victims are not credit worthy, don't have a job and never had the collateral to begin with. The banks don't want to own Puerto Rico - they don't make any money that way. They want it to continue of life support and continue to borrow more money from them (or through them via bonds). Banks only make money by unloading freshly-printed fiat to someone, somewhere. Once that con has played out, the banks can't grow any more. There are no new borrowers to be had. They have to keep re-using the old borrowers - that's where Congress comes in.

Seizing the collateral means booking an actual, material loss and losing a cash-cow victim. It's far better to get someone else to guarantee more debt for the deadbeat and keep that revenue stream alive rather than pull the plug and recognize the loss. In this case, the tax-exempt bond funds and pension funds would get screwed out of the money. The banks wouldn't lose a dime on the default in a way. What they would lose that's more important is the opportunity to continue printing new money to lend to Puerto Rico (regardless of the ultimate sucker bondholder). 

Banks can only pull the plug and recognize the loss themselves when they all collude to do it together. That way, they can hold the government hostage with their imminent collapse and and force the taxpayers to pick up their losses. It's the perfect scam.