Puerto Rico is at risk of registering its largest default to date, as $470 million in debt obligations are due to bondholders Monday.
Much uncertainty surrounds whether the financially strapped island can find the funds necessary to stave off a total default, with Gov. Alejandro Garcia Padilla saying this week that, despite the government seeking a solution with its creditors, an agreement that completely prevents a default is likely not "achievable."
The largest payment due Monday is $422 million owed by the Government Development Bank, which in the past has acted as the island's primary fiscal agent and lender of last resort.
Unfortunately, the GDB is besieged with its own liquidity crisis, with the most recent financial documents showing that the bank only had about $562 million in its coffers. The GDB's financial situation is in such dire straits that Garcia Padilla issued an executive order in early April declaring a state of emergency at the bank and initiating capital controls, which froze nearly all withdrawals and suspended the GDB's lending power.
Late on Friday, the bank announced it was able to come to an agreement with credit unions that hold approximately $33 million of the bonds due Monday, and it was still negotiating a potential transaction related to an exchange of all of the GDB's bond indebtedness. However, its statement noted that the transaction would require the participation of all of the GDB's creditors.