Puerto Rico Nears Next Big Default: A Look at the $2 Billion Due

  • The commonwealth owes $816 million for general obligations
  • Water and power utilities scramble to avoid July 1 default

Puerto Rico and its agencies are facing $2 billion of bond payments due Friday, and Governor Alejandro Garcia Padilla has said the U.S. territory simply doesn’t have the money.

It may mark the island’s biggest default yet and the first time it’s skipped payments on general-obligation bonds, which are given the top claim on the island’s funds. Such a lapse may spark legal battles with creditors if Congress doesn’t pass legislation that would keep litigation at bay while Puerto Rico tries to restructure its $70 billion of debt.

Following is a breakdown of what’s coming due on July 1, according to data compiled by Bloomberg:

General-obligations: About $816 million of principal and interest. Puerto Rico’s constitution stipulates that the government must repay general obligations before other expenses. The commonwealth has $13 billion of general obligations and a default on the securities would be the first payment failure from a state-level borrower on its direct debt since Arkansas in 1933.

Puerto Rico Electric Power Authority: $420 million of principal and interest. The island’s main electricity provider, called Prepa, its bondholders and insurance companies are negotiating on a deal to avoid a default. If so, creditors would lend cash to Prepa to free up funds so the agency can pay investors.

Puerto Rico Highways & Transportation Authority: $220 million of principal and interest. The highway agency repays its debt with gas-tax receipts and toll revenue. The authority is expected to pay investors on July 1 from reserve funds already held by the bond trustee, according to S&P Global Ratings. Future payment are uncertain because Puerto Rico has redirected a portion of the agency’s revenue to the general fund. HTA has $6.4 billion of bonds and notes outstanding.

Puerto Rico Public Buildings Authority: $207 million of principal and interest. The bonds are repaid with rents that public agencies pay for their office buildings and are guaranteed by the commonwealth. The authority has about $4 billion of bonds outstanding.

Puerto Rico Aqueduct and Sewer Authority: $135 million of principal and interest. Island lawmakers are working on legislation intended to allow the water agency to raise money by issuing debt through a newly created entity. If it can’t, the authority has said it may redirect funds used to pay debt to cover overdue bills to contractors and suppliers. It has $4 billion of bonds outstanding.

Puerto Rico Infrastructure Financing Authority: $78 million of principal and interest. Called Prifa, the agency has sold the island’s rum-tax bonds. Bond anticipation notes maturing July 1 are expected to default after Puerto Rico said it would instead use the revenue that normally repays Prifa debt to cover essential services instead. Prifa also defaulted on a Jan. 1 interest payment. It has $1.9 billion of bonds outstanding.

Puerto Rico Convention Center District Authority: $20.8 million of principal and interest. The authority has reserve funds with its bond trustee to make the July 1 payment, but those funds could dry up for the next payment due Jan. 1 because Puerto Rico is redirecting its revenue, according to S&P. The agency uses hotel-room tax receipts to repay debt. It has $397.7 million of bonds outstanding.

Puerto Rico Pension-Obligation Bonds: $13.9 million of interest. The taxable debt was sold to bolster the island’s nearly depleted pension fund. The bonds are repaid from contributions that the commonwealth and municipalities make to the retirement system. It has $2.9 billion of bonds outstanding.

Government Development Bank for Puerto Rico: $9.1 million of interest. The bank has restricted withdrawals unless they are used for essential services. The bank defaulted May 1 on nearly $400 million that was due. It has $5.1 billion of debt outstanding.

Puerto Rico Public Finance Corp.: $4 million of principal. Since August the agency has failed to pay investors and was the first Puerto Rico agency to default after the legislature failed to appropriate needed funds. It has $1.1 billion of debt outstanding.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE