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Puerto Rico Rally at Risk With Rising Debt Expenses: Muni Credit

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The biggest rally in Puerto Rico debt in five years is at risk as the struggling U.S. territory piles up debt costs and moves toward a historic restructuring of its electric utility.

While lawmakers in the junk-rated commonwealth plan a sale of as much as $2.9 billion of bonds backed by petroleum taxes to boost cash, investors say a spiral of fiscal strains may halt the bond gains. Debt service consumes 15 percent of the budget, triple the median for U.S. states, and the pension system has only 3 percent of the assets needed to pay current and future retirees.