Puerto Rico's financial crisis grew deeper Monday when it skipped $37.3 million in debt service payments.
Monday's nonpayment extended beyond the debt of the Puerto Rico Public Finance Corp., which had offering documents explicitly exempting Puerto Rico from a legal obligation to pay the debt, which the PRPFC stopped paying Aug. 3. Now nonpayment has hit the Puerto Rico Infrastructure Finance Authority. No one claims that Puerto Rico did not have a legal obligation to pay the PRIFA debt.
A spokeswoman for the Government Development Bank for Puerto Rico confirmed Monday evening that the payments to PRPFC and PRIFA hadn't been made, while the government did pay about $1 billion toward other public sector debt.
"Overall, I think the defaults are indicative of a budget crisis that brings to question the willingness and ability to pay," said Evercore director of municipal research Howard Cure. "This ultimately leads to an increased chance of general obligation bond defaults."
Puerto Rico did not pay $35.9 million of interest on rum tax bonds issued by PRIFA and $1.4 million in interest on PRPFC bonds. According to Municipal Market Analytics about $17 million of the PRIFA payment was insured.
On Dec. 29 Ambac Assurance Corp. and Financial Guaranty Insurance Co. delivered letters to Puerto Rico's government saying they considered the diversion of money from the PRIFA bonds to be illegal.
In order to pay about $1 billion in other public sector debt payments, Puerto Rico said it diverted money from the income streams for the rum tax bonds, Puerto Rico Highway and Transportation Authority bonds, Convention Center District Authority bonds, Metropolitan Bus Authority bonds, and the Integrated Transportation Authority bonds. Among these authorities, those that made debt service payments today did so by drawing on debt service reserves.
PRIFA had no debt service reserves to draw on.
