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First Default By U.S. Commonwealth In History: Puerto Rico Makes Only 1% Of Required Debt Payment
First Default By U.S. Commonwealth In History: Puerto Rico Makes Only 1% Of Required Debt Payment
Over the weekend Puerto Rico was supposed to make a modest principal and interest payment of some $58 million due on Public Finance Corp. bonds, which however few expected would be satisfied. As a reminder, on Friday, Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla, said during a press conference in San Juan that the government simply does not have the money.
Moments ago Melba Acosta, president of the Government Development Bank, confirmed as much, when he announced that only $628,000 of the $58 million payment, or just about 1%, had been paid.
Below is the full statement from Acosta on the service of PFC Bonds:
Today, Government Development Bank for Puerto Rico (“GDR”) President Melba Acosta Febo issued the following statement on the service of 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.”
In other words, small or not, PR has failed a mandatory principal repayment and is now in default under the PFC bonds. Up next, as per Bloomberg’s preview “the default promises to escalate the debt crisis racking the island, where officials are pushing for what may be the biggest restructuring ever in the municipal market.”
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‘Peak Debt’ At Work: Savings at the Pump Are Staying in Consumer Wallets
‘Peak Debt’ At Work: Savings at the Pump Are Staying in Consumer Wallets
Americans are taking the money they are saving at the gas pump and socking it away, a sign of consumers’ persistent caution even when presented with an unexpected windfall.
This newfound commitment to frugality was illustrated this past week when the nation’s biggest payment-card companies said they aren’t seeing evidence consumers are putting their gasoline savings toward discretionary items like travel, home renovations and electronics.
Instead, people are more often putting the money aside for a rainy day or using it to pay down debt. That more Americans are saving their bounty at the pump comes as a surprise, because the personal savings rate, after rising during and after the recession, has declined steadily over the past two years.
“We haven’t seen the extra savings from lower gas prices translate into additional discretionary consumer spending,” said Ajay Banga , chief executive of MasterCard Inc., on a conference call Friday to discuss quarterly earnings.
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