In between the ongoing social anarchy, Soros funded sedition, congressional folly, looming war with North Korea, we can now add the official collapse of Puerto Rico’s 70 billion dollars worth of debt/bonds. It only takes one rock falling to start an avalanche. While $70 billion, in a sea of derivatives, bonds and debt that rises into the hundreds of trillions, may seem like small fry, Puerto Rico now calls into question the entire US bond market at the city, county, state and federal level. Puerto Rico has brazenly borrowed a truly obscene amount of money, squandered it, and has near zero ability to pay it back from current revenue. Of course, that means Lying Ryan, who has had his corrupt paws over the so called bailout, is going to have to come up with some more money. We see in our liberal cities, and places like the third world cesspool Puerto Rico just what happens after decades of liberal Democratic Party control of finances. The Republicans are equally squalid of course, but it takes a Democratic City Mayor, or governor in the case of PR, to really screw things up.
Obviously, the bonds were mostly sold to pension funds, or bundled into toxic debt bonds, so the people who ended up owning them will get screwed also. What the result of that will be is to call into question whether any municipal bonds can be repaid. It will clearly also limit the ability of government entities, ranging from cities and counties, to utilities, colleges, schools, and pretty much any government blob that wants to fund repair, or overhaul of say, a sewage or water system. Portland, Oregon, after spending a bunch of money to clean up the riot debris, has a school bond for $700 million on the ballot. Well, the backblast from PR may mean the interest rates will be higher. The reason being the risk for people buying municipal bonds just went up and buyers will charge an interest premium to cover that increased risk. Face it, the USA is, and has been for decades now, functionally in default due to the trillions in UNPAYABLE DEBT. Yes, Virginia, the $20 Trillion Federal debt is never going to be paid off, anymore than the vast amount of student loan debt, or bond debt will ever be. PR is merely the shot over the bow of the USS Default. I see it is being called a “restructuring of debt.” LOL It is a default plain and simple.
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Doomer Doug, a.k.a. Doug McIntosh now has a blog at www.doomerdoug.wordpress.com
My end of the world e book “Day of the Dogs” will soon be available for sale at smashwords. The url is
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Puerto Rico Files For Bankruptcy Protection In Largest Ever US Municipal Debt Restructuring
Update: PUERTO RICO FEDERAL BOARD FILES BANKRUPTCY CASE IN U.S. COURT
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As per our report last night that following the expiration of the litigation freeze, Puerto Rico’s creditors had filed a barrage of lawsuits against the insolvent Commonwealth a bankruptcy was imminent, moments ago Puerto Rico’s governor announced the commonwealth will request bankruptcy protection of a portion of the island’s $70 billion in debt, setting up a showdown with Wall Street firms owed billions of dollars, in what will be the largest-ever U.S. municipal debt restructuring and further complicating the U.S. territory’s efforts to pull itself out of a financial crisis.
The Puerto Rico restructuring would be far larger than Detroit’s record-setting bankruptcy, with little to no details how long a court proceeding would last or what cuts would are imposed on bondholders. The island’s financial recovery plan covers less than a quarter of the debt payments due over the next decade.
Cited by AP, Gov. Ricardo Rossello said Wednesday that a federal control board overseeing the island’s finances has agreed with his request to put the debts before a court. He told reporters that he has requested that the U.S. territory’s federal financial oversight board commence a Title III proceeding under last year’s Puerto Rico rescue law known as PROMESA. Title III is an in-court debt restructuring process similar to U.S. Bankruptcy.
“We have reached this decision because it protects the best interests of the people of Puerto Rico,” Rossello said.
“The board has agreed to submit Title III protection immediately and they will submit it.”
According to the WSJ, “the governor said he would petition Puerto Rico’s federal oversight board to invoke a quasi-bankruptcy law that puts its standoff with creditors before a judge. His decision marks the start to what could be a lengthy legal fight as Wall Street watches closely to see how other indebted municipal governments may fare in confrontations with investors.”
As a reminder, Puerto Rico and its agencies owe $73 billion to creditors, dwarfing the roughly $18 billion owed by the city of Detroit when it entered what was previously the largest municipal bankruptcy in 2013.
Finally, Bloomberg notes that the financial collapse promises to impose deep losses on bondholders who for years snapped up Puerto Rico’s securities, even as the government contended with a shrinking economy and chronic budget shortfalls. U.S. states can’t file for bankruptcy, and investors bought the bonds assured that it wasn’t a legal option for Puerto Rico either.
BBG further adds that Rossello’s latest offers to creditors last week shows the commonwealth believes general obligations should receive a better recovery than its sales-tax bonds. The latest proposal offered as much as 90 cents on the dollar to general-obligation bondholders. One such bond due in 2035, was among the most actively traded at a price of 66, up from 64.7 on Tuesday.