Puerto Rico will miss a major debt payment due to creditors Monday, registering the largest default to date for the fiscally struggling U.S. territory.
Gov. Alejandro Garcia Padilla announced on Sunday the "very difficult decision" to declare a moratorium on the $389 million debt service payment due to bondholders of the island's Government Development Bank, which acts as the island's primary fiscal agent and lender of last resort.
"We would have preferred to have had a legal framework to restructure our debts in an orderly manner," Garcia Padilla said in a televised address in Spanish. "But faced with the inability to meet the demands of our creditors and the needs of our people, I had to make a choice. … I decided that essential services for the 3.5 million American citizens in Puerto Rico came first."
This will not be the first default for Puerto Rico. According to Moody's Investors Services, the government has failed to make about $143 million in debt obligation payments since its historic default in August on subject-to-appropriation bonds issued by the Public Finance Corporation.