The Commonwealth of Puerto Rico is expected to default on parts of the $1.9 billion it owes on Friday, July 1 which includes $780 million of general obligation debt. What will or won't the island pay and will the U.S. Senate pass a bill in time in time? No one really knows all of the answers but the municipal market will be waiting and watching and finding out together on Friday.
VOICE OVER: The Puerto Rico debt crisis will take a decisive step this week as the Commonwealth is expected to default on parts of the $1.9 billion it owes Friday. In early June, Puerto Rico CFO, Melba Acosta Febo said her government expected to pay some, but not all of the $780 million general obligation payment due. Janney's Alan Schankel said that he expects the island is unlikely to pay $177 million in Public Building Authority, $77 million in rum tax, and $14 million in Employees Retirement System bonds.
A default on the island’s GO debts, which Puerto Rico’s constitution guarantees, may lead to immediate lawsuits. These would follow two suits filed since mid-June. To deal with its problems, Puerto Rico’s governor is trying to get the US Senate to pass a bill to allow it to put a stay on lawsuits and restructure its debts. If the Senate amends the bill, as is possible, the two Congressional chambers could not approve a reconciled version until early July, leaving Puerto Rico to deal with any additional lawsuits from a default on Friday.
I’m Aaron Weitzman. This has been your Muni Minute.