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Puerto Rico Bond Default?

By

Puerto Rico Governor Alejandro Garcia Padilla

Puerto Rico’s potential bond default could be an owner’s manual for overburdened U.S. states.

Two days before a potential historical default, Puerto Rico Governor Alejandro Garcia Padilla made it clear that the commonwealth won’t pay bondholders even as Congress votes on a bill allowing the island to restructure its $70 billion in debt.

“On July 1, 2016, Puerto Rico will default on more than $1 billion in general obligation bonds, the island’s senior credits protected by a constitutional lien on revenues,” Garcia Padilla wrote in a editorial posted on a CNBC website.

The lapse will mark the first time the U.S. territory has failed to pay what it owes on general-obligation debt, a $13 billion swath that its constitution says has the top claim to the government’s funds. Garcia Padilla previously said the commonwealth couldn’t raise enough to cover what’s owed to bondholders even if he shut down the government. The island has about $2 billion in principal and interest payments due Friday.

Related: Senate passes Puerto Rico financial rescue bill

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.