(BLOOMBERG) Puerto Rico will default on a $422 million bond payment for its Government Development Bank, escalating what is turning into the biggest crisis ever in the $3.7 trillion market that U.S. state and local entities use to access financing.
Governor Alejandro Garcia Padilla invoked a debt moratorium law approved last month, saying during a televised address Sunday that the commonwealth needs to focus on providing essential services. The bank, already operating under an emergency period, had until the end of Monday to make the payment. The Government Development Bank reached a tentative framework agreement with investors who hold $900 million of its debt late Sunday under which creditors would accept a potential haircut, leaving them 47 cents on the dollar of the face value of their original securities, the bank said in a statement. The parties agreed to keep discussions out of court while they negotiate.