New York (HedgeCo.net) – It seemed like it was only a matter of time, but it finally happened on Saturday—Puerto Rico missed a bond payment. The island U.S. commonwealth of 3.5 million people has been in negotiations with hedge funds and other institutional investors, trying to renegotiate the current $73 billion in debt instruments, but the two sides have not been able to come to an agreement.

The first missed payment was from Puerto Rico’s Public Finance Corp. as it failed to pay $58 million on August 1. According to data compiled by Bloomberg, Puerto Rico faces $5.4 billion in bond payments over the course of the next year.

The bigger concern regarding Puerto Rico’s debt and default are the number of mutual funds that are holding the debt. A recent article from Fox Business News featured a quote from Morningstar Analyst Beth Foos, “…half of U.S. open-ended municipal-bond funds hold some exposure to debt of the commonwealth…funds collectively own more than $11.4 billion of the islands debt or just over 15% of its outstanding issuance.”

In the meantime, steps have been taken in Washington which would allow Puerto Rico to file for Chapter 9 bankruptcy protection. The legislation has already been introduced, but it will be tough for the bill to pass. Under current bankruptcy laws, states and territories of the United States do not have the legal authority to declare bankruptcy.