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| Puerto Rico’s Bonds Drop on Governor’s Warning About Debt | Puerto Rico’s Bonds Drop on Governor’s Warning About Debt |
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| The price of Puerto Rico’s bonds dropped on Monday after the island’s governor said that his government could not pay its $72 billion in debts. At least one lawmaker called for Congress to allow Puerto Rico’s public corporations to declare bankruptcy. | The price of Puerto Rico’s bonds dropped on Monday after the island’s governor said that his government could not pay its $72 billion in debts. At least one lawmaker called for Congress to allow Puerto Rico’s public corporations to declare bankruptcy. |
| Gov. Alejandro Garcia Padilla announced in an interview that was published in The New York Times on Monday that the island’s debt was “not payable” and suggested that he would seek significant concessions from many of the island’s creditors and perhaps all of them. | Gov. Alejandro Garcia Padilla announced in an interview that was published in The New York Times on Monday that the island’s debt was “not payable” and suggested that he would seek significant concessions from many of the island’s creditors and perhaps all of them. |
| While investors have been expecting some kind of restructuring of Puerto Rico’s debt in the coming months, the governor’s statement indicated that even general obligation bonds, whose repayment is guaranteed in the island’s constitution, could be cut | While investors have been expecting some kind of restructuring of Puerto Rico’s debt in the coming months, the governor’s statement indicated that even general obligation bonds, whose repayment is guaranteed in the island’s constitution, could be cut |
| On Monday morning, the price of some Puerto Rico general obligation bonds declined as much as 12 percent, to about 68 cents on the dollar, one of the largest declines in recent months, traders and analysts said. | On Monday morning, the price of some Puerto Rico general obligation bonds declined as much as 12 percent, to about 68 cents on the dollar, one of the largest declines in recent months, traders and analysts said. |
| “The market is taking what Garcia Padilla said in the article to heart,” said Hugh McGuirk, a vice president and portfolio manager at T. Rowe Price, who oversees $22 billion in municipal bond assets. “It wasn’t that long ago that they were still beating the drum that debt service was the highest priority and we will never default. This is really a change in the narrative coming out of Puerto Rico.” | “The market is taking what Garcia Padilla said in the article to heart,” said Hugh McGuirk, a vice president and portfolio manager at T. Rowe Price, who oversees $22 billion in municipal bond assets. “It wasn’t that long ago that they were still beating the drum that debt service was the highest priority and we will never default. This is really a change in the narrative coming out of Puerto Rico.” |
| Despite the deepening of Puerto Rico’s troubles, the broader municipal market rose on Monday morning as prices mirrored a rally in United States Treasury prices related to the instability in Greece, investors said. Municipal bond values often tend to track Treasury prices. | Despite the deepening of Puerto Rico’s troubles, the broader municipal market rose on Monday morning as prices mirrored a rally in United States Treasury prices related to the instability in Greece, investors said. Municipal bond values often tend to track Treasury prices. |
| Mr. Garcia Padilla’s call for a vast restructuring, which he will outline in a speech to the Puerto Rico people on Monday evening, also seemed aimed at political leaders in Congress and the Obama administration. | Mr. Garcia Padilla’s call for a vast restructuring, which he will outline in a speech to the Puerto Rico people on Monday evening, also seemed aimed at political leaders in Congress and the Obama administration. |
| Puerto Rico has been pushing in Congress for a bill that would allow the island’s public corporations, which owe about $25 billion in debt, to declare bankruptcy. As a commonwealth, Puerto Rico cannot use the Chapter 9 code of the federal bankruptcy law. But the island’s push for bankruptcy authorization has stalled in Congress. | Puerto Rico has been pushing in Congress for a bill that would allow the island’s public corporations, which owe about $25 billion in debt, to declare bankruptcy. As a commonwealth, Puerto Rico cannot use the Chapter 9 code of the federal bankruptcy law. But the island’s push for bankruptcy authorization has stalled in Congress. |
| In a statement on Monday, Representative Nydia M. Velazquez, Democrat of New York, praised Mr. Garcia Padilla’s strategy and called for Congress to authorize Chapter 9 for Puerto Rico. | In a statement on Monday, Representative Nydia M. Velazquez, Democrat of New York, praised Mr. Garcia Padilla’s strategy and called for Congress to authorize Chapter 9 for Puerto Rico. |
| “Puerto Rican families deserve a fair shot, and we must cut through Washington’s gridlock to create a comprehensive solution,” she said in the statement. | “Puerto Rican families deserve a fair shot, and we must cut through Washington’s gridlock to create a comprehensive solution,” she said in the statement. |
| Despite the rising risks in Puerto Rico, the Obama administration has made it clear there will be no federal rescue of any kind. | |
| “There’s no one in the administration or in D.C. that’s contemplating a federal bailout of Puerto Rico,” the White House press secretary Josh Earnest said on Monday.”But we do remain committed to working with Puerto Rico and their leaders as they face serious challenges.” | |
| Mr. Earnest noted that Treasury officials had been sharing their expertise with Puerto Rico officials over the last few years as they try to address the debt problem. |