The island of Puerto Rico’s debt crisis has hit a perilous stage of defaulting on a debt payment, and Congress was unable to come up with a solution before they went on a week-long recess. Puerto Rico is expected to default by the Government Development Bank on a $422 million payment. It is, so far, the largest missed payment by Puerto Rico.
The debt is held by mutual funds, individual investors, and hedge funds, who were attracted by tax breaks and high yields that the island offered in order to attract business.
Wall Street Journal reports:
“The government will make a $22 million interest payment due Monday, a GDB spokeswoman said, but it will likely miss a $367 million principal payment. The government earlier swapped $33 million worth of debt coming due Monday for new debt with later maturities,” the spokeswoman said.
A provisional deal announced Monday with hedge funds holding about $900 million of GDB bonds shows the complex lengths that Puerto Rico’s leaders must go to as they wait for Congress to establish a legal framework for a broader restructuring.”
The debt crisis has made it difficult for the government to pay for basic services, with Puerto Rican Gov. Alejandro García Padilla saying, “We simply don’t have enough money to pay for all these services and pay our creditors”.
On Last Week Tonight with John Oliver, host John Oliver went into full detail on how the debt crisis became an issue and how it is hard for them to make payments.