Saturday’s deadline could mark the first skipped payment to bondholders since Gov. Alejandro Garcia Padilla last month said that the island’s debts were unsustainable and urged negotiations with creditors. Because Saturday is a weekend, payment can be made Monday, a spokeswoman for Puerto Rico said.
Public Finance Corp., a financing unit for Puerto Rico’s government, this month notified holders of appropriation bonds, typically those backed by funds set aside by the legislature, that it hadn’t transferred money to a trustee to pay the debt due at the beginning of August. The corporation said the legislature never actually appropriated the funds. The missed transfer led some ratings firms to say the island was highly likely to default.
Some bonds from Public Finance Corp. maturing in 2031 touched a record low below 12 cents on the dollar this week, according to the Electronic Municipal Market Access website.
Investors have braced for a cascade of defaults since last month, when Garcia Padilla called for talks with bondholders to delay some payments.
A nonpayment would be another setback for Puerto Rico’s 3.5 million residents, who already have struggled with a decade of economic stagnation and high unemployment, highlighting the breadth of the commonwealth’s financial woes as it attempts to preserve its cash, avoid a government shutdown and pay its creditors.