Can anything save Puerto Rico from default?

While the ongoing economic drama in Greece is still dominating the financial news headlines, some analysts say Americans should be paying closer attention to a crisis that's unfolding in their own backyard, in Puerto Rico.

The U.S. territory and self-governing commonwealth once had one of the most dynamic economies in the Caribbean, fueled in part by manufacturing investment from the American mainland and federal tax breaks.

But the end of those tax breaks nearly a decade ago, along with fallout from the Great Recession, have crippled Puerto Rico's economy over the ensuing years.

Puerto Rico is scheduled to make nearly $200 million in bond payments on August 1, with over $5 billion more due over the next 12 months.

But now, with the island's governor saying its $72 billion in public debt is "not payable," and the Obama Administration saying it won't bail out the commonwealth, Puerto Rico is in danger of defaulting.

It's also entering relatively uncharted economic waters. As a U.S. territory, Puerto Rico cannot file for Chapter 9 bankruptcy protection like Detroit did last year.

Analysts are saying that, given the current situation, one of the only options open to Puerto Rico is the imposition of strict fiscal and structural reforms, designed to help the island's economy eventually grow its way out of the economic crisis.

Peter Hayes, head of the Municipal Bonds Group at Black Rock, estimates Puerto Rico will have to cut its current debt nearly in half, to a more manageable $40 billion, as part of that financial restructuring. And he blogs that bondholders' recovery rates could range from "30 percent or less for subordinate, unsecured or appropriated debt to as high as 100 percent for bonds that are deemed by the courts as secured."

Hayes remains positive about Puerto Rico's financial future, saying the "the overall municipal market is on solid footing...creditworthiness is strong and attractive relative yields should continue to draw demand for the asset class."

But not everyone is as optimistic. As Martin Hutchinson points out in Wall Street Daily, this unique situation means a Puerto Rico default could end up with its own unique financial ripple effect.

Since the island can't currently file for bankruptcy reorganization, he notes, individual income investors holding municipal bonds would be facing the greatest burdens. And any debt restructuring, he adds, would "hurt income investors, weaken the municipal bond market, and increase the likelihood of other bankruptcies."