Puerto Rico defaulted on obligations on Monday after the U.S. territory, as expected, did not pay most of its $58 million Public Finance Corporation (PFC) bond payment due. The government paid only $625,00 of the $58 million due to PFC bondholders.
The default has been met with criticism from the press and impacted parties, who claim that the government’s chosen course of action was avoidable, its claims of a liquidity crunch are misleading and self-serving, and that the choice will have long term implications for Puerto Rico in the financial markets.
Puerto Rico paid a significant portion of its total $483 million due yesterday. Most of the unpaid portion of the $58 million debt is owned by Puerto Ricans through credit unions.
Government Development Bank for Puerto Rico President Melba Acosta Febo issued the following statement yesterday on the service of the Public Finance Corporation (PFC) bonds:
“Due to the lack of appropriated funds for this fiscal year the entirety of the PFC payment was not made today. This was a decision that reflects the serious concerns about the Commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained.”
“PFC did make a partial payment of interest in respect of its outstanding bonds. The partial payment was made from funds remaining from prior legislative appropriations in respect of the outstanding promissory notes securing the PFC bonds. In accordance with the terms of these bonds, which stipulate that these obligations are payable solely from funds specifically appropriated by the Legislature, PFC applied these funds—totaling approximately $628,000—to the August 1 payment.”
Impact is most certainly a verb as well as a noun. Its use in the instance is awkward but correct nonetheless.