Puerto Rico

Puerto Rico governor Alejandro Garcia Padilla is set to address the island's debt problem at a press conference on Wednesday.

Earlier this month, Puerto Rico narrowly avoided default by utilizing a revenue clawback end-around to make $354 million in debt payments. Some $273 million of the total due was tied to GO debt, meaning that had the island missed the payment, a cascade of messy litigation would likely have followed. 

Subsequently, PREPA - the island’s power utility - managed to secure a deal with creditors and the monolines that will allow for the restructuring of $8.2 billion in debt. Should the agreement materialize, it would be the largest restructuring in muni history. 

Last week, the market got some good (and “good” is a relative term here) news with regard to Puerto Rico’s debt crisis. 

The commonwealth - which you’ll recall is struggling to crawl from beneath a debt pile that sums to $70 billion - managed to strike a deal with PREPA’s creditors and the monolines that will see bondholders and lenders accept losses of 15% with the insurers putting up a $450 million surety bond.

When last we checked in on Puerto Rico’s seemingly intractable debt debacle, Governor Alejandro Garcia Padilla was pandering to Congress in an ill-fated attempt to secure some manner of federal intervention that would help to alleviate the strain on the island’s finances. 

Meanwhile, the commonwealth avoided a messy default on $273 million in GO debt by using an absurd revenue clawback end-around to make a $354 million payment on December 1. 

There are several conjectures on the factors that may cause Puerto Rico's unsustainable indebtedness.