The U.S. territory of Puerto Rico did not pay $911 million of bond payments due July 1, as expected. At least $779 million of that is general obligation bonds, which are constitutionally-backed debt and supposed to be guaranteed. <\/p>\n
However, Puerto Rico Governor Alejandro Garcia Padilla has issued a debt moratorium that allows the territory to default on the general obligation bonds also. This is not the first time Puerto Rico has defaulted on payments due on its debt. The Commonwealth started defaulting on smaller payments last year for several agencies. In May, the government defaulted on the majority of the $422 million of debt that it owed. <\/p>\n
The island had $2 billion in bond payments that was due on July 1. In total, the Commonwealth and its agencies owe over $70 billion of debt. <\/p>\n
News of the default comes just as President Barack Obama signed the Promesa legislation into law to help Puerto Rico deal with its debt load. Because the territory is not a U.S. state, it has not been able to file for municipal bankruptcy protection under Chapter 9. Promesa, which is the Puerto Rico Oversight, Management and Economic Stability Act, will establish a several-member federal board to oversee Puerto Rico\u2019s finances. The board will be able to postpone lawsuits from creditors seeking payments owed and restructure the U.S. Commonwealth\u2019s debt, including make bondholders go to court, if necessary, to lower the territory\u2019s debt obligations. (The U.S. Senate had passed the bill on Wednesday, making it possible for Mr. Obama to sign the legislation.)<\/p>\n