Puerto Rico Would Be 'Top Of The Headlines' If Not For Greece

Debt-riddled Puerto Rico managed to pay all of the $1.9 billion it owed to creditors on Wednesday. But the U.S. territory is still treading in deep water, and Governor Alejandro Garcia Padilla has openly labeled its $73 billion in debt "not payable."

Benzinga caught up with JJ Kinahan, chief strategist at TD Ameritrade, to discuss the island's wobbly financials.

Debt Hits Closer To Home

According to Kinahan, "[Puerto Rico] would be at the top of the headlines if it weren't for Greece." Although he said the crisis in Europe has much larger economic implications overall, he warned that "the Puerto Rican debt [would hit] closer to home."

Kinahan explained that, while Greece primarily owes its dues to the IMF, ECB and other public institutions, many of Puerto Rico's lenders are actually personal investors on the island and in the continental United States.

"It's not so much stocks" in this case, Kinahan said, "but individual lives that can be affected if their retirement funds are put in jeopardy."

Related Link: Trouble In Paradise: Puerto Rico's Mounting Debt Crisis

He identified retail and financial markets as sectors under short-term threat from Puerto Rico's debt crisis. "Housing, durable goods, and cars" could take a hit over the longer term.

Kicking The Can

Kinahan said that Puerto Rico seems to be kicking the can down the road, not defaulting on its payments but, at least according to the governor, not in a position to settle the debt either.

One reason, according to the strategist, is that personal investors have a lot to lose: "If Puerto Rico defaults they lose all their money, but if [the Commonwealth] restructures, there's at least some chance that they get some of their money back."

In addition, he believes that low interest rates might also play a role in creditors' willingness to delay settling the issue. He posited that lenders may not feel as much urgency in receiving their due payments, since it's not as if they could lend that money elsewhere and achieve a high yield. "It has made people more patient with their money."

Not As Bad As Greece

Overall, Kinahan doesn't think that Puerto Rico's straits are nearly as dire as Greece's, primarily because there is no threat of the Commonwealth abandoning the U.S. dollar. Currently, he sees all of Europe as "suspect" and expects the Eurozone's failure to define a mechanism for exit from the bloc to bite it in the back.

Puerto Rico's next big deadline comes in August. Between now and then, local officials will seek federal bankruptcy protection (although U.S. territories are eligible under current law) and fiscal reform to mitigate the crisis.