Debt-plagued Puerto Rico defaults on a bond payment for the first time

04-Aug (Washington Post) — Debt-plagued Puerto Rico defaulted on a bond payment for the first time Monday, triggering what is likely to be a long battle with creditors as it seeks to restructure about $73 billion in loans.

The U.S. territory, whose governor has declared its debts “unpayable” and is seeking the largest restructuring ever in the country’s municipal bond market, paid just $628,000 of a $58 million payment owed by its Public Finance Corp. because the legislature didn’t provide enough money, according to the island’s Government Development Bank.

“Due to the lack of appropriated funds for this fiscal year the entirety of the PFC payment was not made today,” bank president Melba Acosta Febo said in a statement. “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 maintained.”

The default marks an escalation of the financial crisis on the island, which has been caught in a nearly decade-long recession that has crimped government revenues and triggered an exodus to the U.S. mainland.

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