'Greece of the Caribbean': Puerto Rico defaults on bond payment

The US territory of Puerto Rico, deep in economic crisis, has defaulted on part of its $73-billion debt by missing a bond payment due on Monday, rating firm Moody's said.

"Bondholders today did not receive full and timely payment of debt service due August 1 on bonds issued by the Puerto Rico Public Finance Corporation," said Emily Raimes, vice president at Moody's Investors Service, in a statement.

"Moody's views this event as a default," she added.

Dubbed the "Greece of the Caribbean," the US island was supposed to pay about $58 million in interest and principal on the PFC securities, but only made a partial payment on the interest.

"This is a first in what we believe will be broad defaults on commonwealth debt," the Moody's vice president said.

She added that the default shows "Puerto Rico does not have the resources to make all of its forthcoming debt payments."

Earlier Monday, the Government Development Bank for Puerto Rico announced that the full payment was not made "due to the lack of appropriated funds for this fiscal year."

The GDB president, Melba Acosta Febo, said the partial payment was made from funds remaining from previous legislative appropriations, noting that the bonds are payable only by specifically appropriated funds.

PFC applied those funds, about $628,000, to the interest of the payment due Monday, she said in a separate statement.

"This was a decision that reflects the serious concerns about the Commonwealth's liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained," she said.

Moody's noted that since the payment on those bonds is subject to appropriation, "the lack of appropriation means there is not a legal requirement to pay the debt, nor any legal recourse for bondholders."

The Caribbean island of 3.5 million people has seen its economy contract for seven years.

In June, Governor Alejandro Garcia Padilla said the island would seek to reschedule its debt with creditors in hopes of avoiding a default.