Puerto Rico hurtles toward default

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)

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