- General obligation bonds have been viewed as essentially default-proof forever, but part of Puerto Rico's five-year plan to restructure its $72B in debt includes the Commonwealth's GO paper.
- These bonds were issued with a constitutional promise that the government would pay the debt service ahead of any other bills it has. "Unheard-of" is how the plan is described in a NYT article pondering the spillover effect to other GO debt should Puerto Rico successfully restructure.
- Bond investors will no doubt put up a major fight, and Van Eck strategist Jim Colby expects a constitutional battle. Moody's Ted Hampton agrees, and sees a high probability of a long legal war.
- Source: Barron's
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