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Puerto Rico fails to make loan payment

August 4, 2015

The US territory of Puerto Rico has defaulted on a bond payment, according to ratings firm Moody's. The Caribbean island had been struggling with a debt crisis.

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Puerto Rico Staatspleite Symbolbild
Image: picture-alliance/AP Photo/R. Arduengo

The Government Development Bank of Puerto Rico confirmed on Monday that it had made only a partial payment of interest totaling $628,000 (about 537,000 euros) on a $58 million (53 million euros) debt payment which had fallen due on August 1.

"Due to the lack of appropriated funds for the fiscal year the entirety of the [Puerto Rico Public Finance Corporation] payment was not made today," Government Development Bank President Melba Acosta Febo said in a statement released Monday.

"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 being maintained," she said.

Moody's: It's a default

Puerto Rico's government on Friday argued the situation should not be considered a default under a technical definition of the term.

But Moody's Investor Service on Monday deemed it to be a default as bondholders did not receive "full and timely payment" of debt services due on bonds issued by the Puerto Rico Public Finance Corporation.

"This event is consistent with our belief that Puerto Rico does not have the resources to make all of its forthcoming debt payments," Emily Raimes, a vice president at Moody's, said in a statement. "This is a first in what we believe will be broad defaults on commonwealth debt."

Concern over a cash crunch has been building for weeks, with Governor Alejandro Garcia Padilla warning in June that the territory would not be able to pay its debts of about $72 billion. At the time, the White House said there were no plans for the US government to bail out Puerto Rico. Because of its status as a US territory, not a state, public agencies in Puerto Rico cannot file for bankruptcy.

The Caribbean island, home to about 3.5 million people, is nearly a decade into a deep economic slump. Many younger residents have left for the US mainland due to the conditions, which has exacerbated the problems.

se/cmk (AP, dpa, AFP)