A prominent U.S. newspaper reported Puerto Rico cannot pay “roughly $72 billion in debts.”

The New York Times reported Sunday that Puerto Rican Governor Alejandro Garcia Padilla and senior members of his staff have said “they would seek significant concessions from as many as all of the island’s creditors.”  The report said the concessions could include deferring some debt payments for five years or more. 

“The debt is not payable,” Governor Garcia Padilla told the Times. “This is not politics, this is math.”

The newspaper account says the island has more municipal bond debt per capita than any American state.

The New York Times said much of the island’s debt is “widely held” by individual U.S. investors on the mainland in mutual funds or other investment accounts who “may not be aware of it.”

The report added that the island, because it is a commonwealth, does not have the option of a bankruptcy. A default would “leave the island, its creditors and its residents in a legal and financial limbo,” similar to the financial crisis in Greece.

The governor has commissioned a report of the island’s financial status by former officials at the International Monetary Fund and the World Bank. The report said “there is no U.S. precedent for anything of this scale or scope.”

The Times said Puerto Rico has hired Steven Rhodes, the retired judge who oversaw the city of Detroit’s bankruptcy, as an adviser.  Puerto Rico is also consulting with a group of bankers from Citigroup who advised Detroit on its debt exchange with creditors.

Rhodes told The New York Times Puerto Rico needs “Chapter 9 for the whole commonwealth.”  

Chapter 9 is the legal term for a bankruptcy proceeding.

Puerto Rico is a territory of the United States with commonwealth status. 

 
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