Puerto Rico has triggered the biggest municipal default in US history
AMBROSE EVANS-PRITCHARD, THE TELEGRAPH
BusinessInsider.com
Aug. 4, 2015
Puerto Rico has triggered the biggest municipal default in US history, risking years of bitter legal warfare with creditors and an austerity “death spiral” with echoes of Greece.
The island commonwealth finally ran out of money on Monday after a desperate effort to stay afloat, missing a final deadline for a $58 million payment — handing over just $628,000.
It implies a sweeping default on much of its $72 billion debt burden, equal to 100% of Puerto Rico’s gross national product (GNP) and more than five times the debt ratio of California or Texas.
The commonwealth is now in legal limbo, facing a well-organized pack of hedge funds that scooped up the debt at distressed levels and appears determined to extract maximum value in the courts, even if this means shutting down part of the island’s education system and social services.
Puerto Rico is not covered by the “Chapter Nine” bankruptcy code in the US, and therefore it cannot resort to the sort of orderly debt restructuring that helped the city of Detroit to get back on its feet after defaulting in 2013.
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