Puerto Rico’s $72 billion debt crisis is changing day by day, but looming over investors in the island Commonwealth’s beaten down bonds, is the potential for default.

Last week, Puerto Rico missed a payment to one of its trustees after the legislature failed to appropriate the required funds, according to Amey Stone of Barron’s. Those funds were for a $58 million payment due August 1 to Puerto Rico’s Public Finance Corp., or PFC. “Without quick action by Puerto Rico’s bank or lawmakers, the commonwealth is likely to default,” according to Stone.

It looks like Puerto Rico is about to miss a bond payment and possibly default for the first time. The result will be devastating to Puerto Rico’s bonds, which were marketed as safe and secure investments.

Puerto Rico has been in a recession since 2006 and its population is rapidly shrinking. In other words, it looks like there is no way to escape financial devastation.

A Moody’s analyst put the odds of default as almost certain, according to Stone. The analysts noted that the heightened-prospects for non-payment of the PFC debt on August 1 “are consistent with our view that the probability of default on Puerto Rico’s securities is approaching 100%.”

Some in Washington are attempting to address the crisis. Senate Democrats last week introduced a bill to allow Puerto Rico to file for bankruptcy protection similar to Chapter 9, which would make it easier for the islands various debt-burdened agencies and organizations to restructure their debts by providing a framework and orderly process, according to Reuters. Republicans want to see more evidence of reforms in Puerto Rico before agreeing to such bankruptcy protection, according to Reuters.

Regular readers of this blog, which has been focused on the plight of Mom and Pop investors in Puerto Rico bonds, know that the island’s government agencies cannot use Chapter 9 and instead have to renegotiate their debts with creditors.

Those negotiations between Puerto Rico’s indebted agencies and their creditors have begun and apparently are not going well.

“The Puerto Rico Electric Power Authority said a bondholder proposal to restructure the utility’s debt isn’t achievable because it imposes disproportionate risks on ratepayers and other creditors,” according to a Bloomberg report from Thursday. “A group representing bondholders of Puerto Rico’s main electric utility proposed an $8.1 billion debt exchange Thursday that would delay payments for several years and give the junk-rated agency $2.5 billion to upgrade power systems.”

The power authority, known as PREPA, said the plan fell short, according to Bloomberg. The plan “does not provide a path for a successful restructuring,” according to a spokeswoman for the utility. “It does not share the burden.”

PREPA “has been negotiating with creditors for almost a year on how to restructure its finances and meet obligations,” according to the report. “The proposal from the group representing bondholders including OppenheimerFunds Inc. and Franklin Templeton Investments is an alternative to a plan released by the island’s main power provider on June 1.”

Negotiations between bondholders and issuers are faltering, Washington is dithering and time is running out for Puerto Rico. The next few weeks will likely prove pivotal for owners of its debt.

Zamansky LLC are securities and investment fraud attorneys representing investors in federal and state litigation against financial institutions. For more information about Zamansky LLC, please visit http://www.ubspuertoricofunds.com/.