Puerto Rico is in an epic struggle to borrow money from the markets, and the clock is ticking.
The island, a territory of the United States, is in the midst of a debt crisis. With only 3.7 million people, it owes an eye-watering $70 billion in public debt, behind only New York and California. And much of that debt is widely held by American investors in municipal bond funds.
In theory, Puerto Rico should be borrowing less, not more. But ratings agency Moody's is concerned about a near-term liquidity shortfall—a lack of breathing room, so to speak, when it comes to covering what is budgeted to be an $820 million budget deficit this year.
(Read more: Puerto Rico approves measures to manage debt load)
On Dec. 23 Moody's wrote "An inability or unwillingness to access the market in January 2014 would be a negative rating factor." In other words, not borrowing money, or better said, not being able to, could lead them to downgrade Puerto Rico's debt, which would put the island at junk bond status.
The chairman of the Government Development Bank, David Chafey, told investors in October that liquidity in fiscal year 2014 would not be a problem, and that the island could get through the entire year without borrowing if it had to. Chafey and Puerto Rico Treasury Secretary Melba Acosta told CNBC that the island will go to market in the next month.
"We are preparing to go to market," Chafey told CNBC. "There are additional moves we took this week to demonstrate additional fiscal responsibility. Therefore, timing is some time in the month of February."