Puerto Rico Defaults on Debt as Obama Approves Restructuring
- Governor invokes debt-moratorium law after federal bill passes
- U.S. legislation shields the commonwealth from lawsuits
Puerto Rico Nears Next Big Default
Puerto Rico pushed a record amount of its bonds toward default by declaring a moratorium on debt payments after President Barack Obama signed a law sheltering the island from bondholder lawsuits as it seeks to arrest a financial collapse.
It will mark the first time the U.S. territory has failed to pay on its general obligation bonds, a $13 billion swath that the island’s constitution says must be covered before other expenses. Governor Alejandro Garcia Padilla announced the decision as Obama enacted legislation to install federal oversight of Puerto Rico and extend it the power to cut debts in court, potentially strengthening the commonwealth’s ability to wrest concessions from recalcitrant investors. The island and its agencies owe about $2 billion on various securities Friday.