Puerto Rico was hoping to get through the year by issuing bonds to the tune of some $3 billion. The sale was to be backed by a consortium of hedge funds, which were requiring Puerto Rico’s legislature to pass certain measures, including a value-added tax, as well as a levy on petroleum products, as a condition of their support.
Despite dire warnings from the Puerto Rico’s bankers and finance ministers as to the consequences of noncompliance, the legislature did not pass the required laws. The government’s quarterly filing to the Municipal Securities Rulemaking Board makes for grim reading. The FT:
Without a new bond sale, the government and the Government Development Bank — the de facto finance ministry — might deplete the last of their cash by September 30, the filing said.
It is now trying to find new revenue sources and areas to cut in the budget for the 2015-16 fiscal year, but the government said in the filing that it could be forced to take other, more drastic measures.
“These measures could also include a moratorium on the payment of debt service, a debt adjustment, or the utilisation for the payment of the Commonwealth’s debt service of certain taxes and other revenues previously assigned by law to certain public corporations to secure their indebtedness,” the filing said.
A deeply underfunded pension system, municipal utilities that are likely to default this year, and no bankruptcy procedures on the books for unwinding this mess as a territory of the United States, we really may have a little Greece of our very own unraveling off our shores.