At the top of the bond hierarchy, are the general obligation (GO) bonds that have constitutional provisions that give these bondholders the right to sue the commonwealth, if necessary, to apply any available resources to pay GO debt service. A separate constitutional provision gives GO bondholders a first claim on the government's available resources.
Jan. 1 is the next scheduled GO debt payment, when $332 million in interest is due to bondholders.
In order to try to preserve liquidity, the Puerto Rican government decided in July to stop making the required monthly set-asides for this payment, so the governor signed an unprecedented executive order on Dec. 1 to implement a "clawback" mechanism to redirect money pledged to other bonds in order to meet the GO obligation.
On the other end of the spectrum are appropriated bonds, such as the Public Finance Corp. (PFC), a subsidiary of the Government Development Bank, which defaulted on its debt in August when it failed to make the full $58 million payment due to bondholders. Since that historic default, the PFC has missed every monthly payment due to bondholders.
As the countdown to the $1 billion debt deadline continues, the governor restated that the island is out of money, and faces a serious humanitarian crisis absent help from the U.S. government.