Are we finally going to get the 51st state?

http://www.huffingtonpost.com/entry/puerto-rico-to-default-after-missing-payment_55bc190ee4b0d4f33a0301d5?

Unable to pay $72 billion in debt, the U.S. territory is on thin ice as citizens' needs collide with empty coffers.

Puerto Rico will miss a payment on debt due Aug. 1, the governor's chief of staff said on Friday, an event that will be considered a default by investors as the commonwealth lurches towards what could be one of the largest U.S. municipal debt restructurings in history.

The island faces a number of debt payments that day but had signaled in recent weeks that it may miss the $58 million payment on Public Finance Corporation (PFC) bonds.

"Tomorrow is Aug. 1 and we don't have the money," Puerto Rico's governor's chief of staff Victor Suarez told journalists in San Juan. "The PFC payment will not be made this weekend. It was not consigned."

Suarez also said the government only had enough cash to operate until November if no additional measures are taken to increase cashflow.

The PFC missed payment will mark the first by the commonwealth. According to a 2014 bond offering statement, Puerto Rico has never defaulted on the payment of principal or interest of debt.

"What could surprise investors is when they actually hear the word 'default,' and that a default occurred," said Lyle Fitterer, head of tax-exempt fixed income at Wells Capital Management, which holds mostly insured Puerto Rico debt.

"The immediate reaction might be a slight sell-off in the marketplace because I think people will start to anticipate, 'OK, what's the next series of debt they're going to default on?'"

Puerto Rico Governor Alejandro Garcia Padilla shocked investors in June when he said the island's debt, totaling $72 billion, was unpayable and required restructuring.

The non-payment by Puerto Rico would be the most notable since Detroit, which had about $8 billion of bonds, defaulted on $1.45 billion of insured pension bonds before it filed for bankruptcy in 2013.

The PFC skipped payment had been signaled to investors over the past few weeks. Suarez said on Monday that the commonwealth did not have the current cash flow to pay the PFC bonds. PFC bonds have weaker protections than many other Puerto Rico bonds.

"I bought my (PFC) bonds with the anticipation of them defaulting," said Ben Eiler, managing partner at First Southern Securities in Puerto Rico, earlier this week. "They're going to restructure in some form or fashion, and I believe that restructure is going to be higher than that level."

However, Puerto Rico is making another debt payment due. The head of its Government Development Bank (GDB), President Melba Acosta, said in a statement released Friday that the bank would make a $169 million payment for the debt service on GDB debt.

"From the perspective of Puerto Rico, it makes the most sense to default on the PFC bonds," said Michael Comes, portfolio manager and vice president of research at Cumberland Advisors in Florida. "There's no recourse back to them if they don't make the payments."

The likelihood of a restructuring is leading investors to wonder how Puerto Rico will prioritize debt payments versus citizens' needs.

"We're beginning to discern a ... mindset on the island that the government is weighing the interest of investors against the economic interest of the island," said Thomas McLoughlin, UBS chief investment officer wealth management research, on Thursday.