A Puerto Rico agency defaulted on bonds for the first time Monday, initiating a clash with creditors as the struggling commonwealth seeks to renegotiate its $72 billion debt load.
The Caribbean island paid just $628,000 of what was due on securities sold by its Public Finance Corp. because the legislature didn’t provide enough money, Melba Acosta, the president of its Government Development Bank, said in a statement. About $58 million of interest and principal was due.
“This was a decision that reflects the serious concerns about the commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained,” Acosta said in a statement.
The default marks an escalation of the debt crisis racking the island, where officials are pushing for what may be the biggest restructuring ever in the municipal market. Puerto Rico bond prices have tumbled amid speculation that the island won’t be able to repay what it owes as its economy stagnates and residents leave for the U.S. mainland.
It has about $5 billion of principal and interest due over the next 12 months, according to data compiled by Bloomberg.