"Puerto Rico will default on a $422 million bond payment for its Government Development Bank, escalating what is turning into the biggest crisis ever in the $3.7 trillion market that U.S. state and local entities use to access financing...A default on those constitutionally guaranteed bonds would be the first by a state-level borrower since Arkansas missed payments on its debt in 1933. That would likely trigger a restructuring of the commonwealth’s $13 billion of general obligations, which would be the largest-ever in the tax-exempt market."
This situation has been building for a long time. Puerto Rico has $70 billion in muni bonds, they have been in the grip of a severe recession for a long time, and now they are in the process of defaulting on these bonds, piece by piece. There is an unusual problem in that Puerto Rico is a US territory, not a sovereign nation, so it can't go to the International Monetary Fund or pursue other sovereignty-related remedies. It isn't a state, either, and it can't go bankrupt. Congress passed law in 1984 saying that US territories can't use Chapter Nine, the bankruptcy provision for local governments. So Puerto is betwixt and between, as the saying goes. They can't pay and they can't discharge or reorganize the debts, so they are defaulting. The Republican-controlled, do-nothing, blame-Obama-for-everything Congress could fix this, but so far they haven't. Republican Speaker of the House Paul Ryan clearly wants to take action.