WASHINGTON (Sputnik) — On June 29, 2015, Governor Alejandro Garcia Padilla announced that Puerto Rico could not pay its $73 billion debt and would soon run out of money to operate the government.
“Moody's ratings assume no US federal payment on Puerto Rico's (Caa3 negative) debt, and any effort by the federal government on the commonwealth's behalf would have marginal near-term effects,” Moody’s said in a new report.
Because of Puerto Rico’s unique status as United States territory, the US Congress must approve of debt restructuring under Chapter 9 of the Bankruptcy Code.
However, Moody’s said Chapter 9 is also unlikely to resolve Puerto Rico’s debt problem.
"Since Chapter 9 is unlikely to be a viable way to achieve a consolidated restructuring of all the commonwealth's debt, bankruptcy authorization would not be sufficient by itself to manage Puerto Rico's current pressures," Moody’s explained.
Moody’s stated the possibility of default as well as restructuring of debt obligations creates doubts that bond holders will be paid in full on a number of Puerto Rican debts and utility bonds.
