Government could run out of cash in 3 months
A severe liquidity crisis that threatens to shut down Puerto Rico’s government is making life difficult for U.S. municipal bond investors.
The island territory has been labeled “America’s Greece.” Its $73 billion in bonds trading in the U.S. municipal-bond market carry junk ratings and are trading at record-high yields.
In a letter last week, the island‘s Government Development Bank said the government would likely shut down in three months, unless lawmakers agree on a financing deal that would see the island double its sales tax in an effort to balance its budget and allow it to sell $2.9 billion in new bonds.
Last Friday, Standard & Poor’s downgraded the Puerto Rico’s credit rating to CCC-plus, pushing it even further into junk territory, while a Bank of America report dated April 17 warned of the danger of “widespread restructuring for the commonwealth.”
Full article: Puerto Rico hurtles toward default (MarketWatch)