Debt-Choked Puerto Rico at Fiscal Brink as Bond Buyers Pull Back

18-May The sobering news arrived in San Juan via telephone from Washington.

It was April 28, and U.S. Treasury Secretary Jacob J. Lew called to tell Puerto Rico officials they must confront one of the island’s gravest financial crises without a bailout. Saddled with $72 billion in debt, the commonwealth — a U.S. territory since the Spanish-American War — needs a “credible” plan, Lew said.

The Caribbean island is hurtling toward the fiscal brink. After years of borrowing to paper over deficits, and with $630 million due to investors on July 1, Puerto Rico may confront the unthinkable: a default. The prospect has set Wall Street on edge as bond yields surpass those of Argentina and Greece; about half of municipal mutual funds hold commonwealth debt.

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