UPDATE 3-Fed's Dudley sounds alarm over Puerto Rico's high debt load
(Adds yields on Puerto Rico bonds)
SAN JUAN, June 24 (Reuters) - New York Federal Reserve Bank President William Dudley warned Puerto Rico about its growing debt load and questioned if the island can sustain its high level of borrowing in remarks delivered to an accounting group on Tuesday.
"Persistent deficits in the Commonwealth's fiscal accounts as well as mounting deficits in the operation of the several major public corporations have substantially raised the island's overall level of public debt and led to serious concerns about whether the island's fiscal position is sustainable," he said.
He added the bank is working on a report to "examine the factors leading to the sizeable buildup of public debt" and "its future trend."
During questions after the speech, Dudley declined to speculate on whether Puerto Rico would default, but said "the next three to six months are going to be very, very important."
He also would not comment on restructuring. Some believe the island cannot turn things around without restructuring $70 billion in outstanding debt - a move akin to filing for bankruptcy - and in the spring Puerto Rico hired Wall Street restructuring consultants.
"The time is right to make some of the tough decisions," he said. "You can be in a much better place even six months or a year from now."
Earlier this year Puerto Rico sold $3.5 billion bonds in the largest junk deal ever in the U.S. municipal bond market
Late Tuesday afternoon, after Dudley's remarks, yields on the bonds spiked to a record high of 9.731 percent, or 84.625 cents on the dollar, in a large sale. By the end of the day, yields hovered closer to 9.667 percent, or 85.125 cents on the dollar, as customers bought up large lots of the debt. Yields move inversely to price. Continuación...