Two years ago, almost to the day, I wrote about the Puerto Rican debt crisis and how mutual funds had foolishly loaded up on high-yielding, risky Puerto Rican debt. Thus investors who thought they owned, say, Virginia municipal bonds, actually had 50% or more of their assets in Puerto Rican debt.
The WSJ reports today that the island will officially default today:
Puerto Rico will default on its constitutionally guaranteed debt for the first time Friday by failing to make most of some $1 billion in payments due, officials said on Friday.
The island’s Government Development Bank said the territory faces an imminent cash crunch and that its cash balances have dropped to “dangerously low” levels. As a result, the government isn’t likely to make any of the $779 million payment on general obligation bonds due Friday.
“Even if the commonwealth were to devote every last penny” in its operating account to Friday’s debt payments, “it would still owe holders of the public debt hundreds of millions of dollars,” the GDB said in a statement.