Shares of Bermuda-based bond insurer Assured Guaranty plunged more than 13 per cent in New York trading yesterday after Puerto Rico’s Governor described the island’s $72 billion debt as “unpayable”.

Assured had $4.9 billion of par exposure to Puerto Rico and its agencies as of March 31, according to a regulatory filing.

Governor Alejandro Garcia Padilla told the New York Times the island’s debts were not payable and that creditors would probably have to take significant concessions. Mr Garcia Padilla had previously rejected the possibility of default.

The bond insurer’s shares fell $3.66, or 13.35 per cent, to close at $23.76, having fallen as low as $23 in afternoon trading.

US rival MBIA, which has around $4.5 billion of exposure to Puerto Rico debt, took an even worse shellacking, plummeting 23.4 per cent to $6.37.

Puerto Rico faces crunch time this week with a June 30 deadline to restructure some of its debt or bump the deadline.

Mr Garcia Padilla warned investors to prepare to sacrifice and told the New York Times in an article published on Sunday: “The debt is not payable. There is no other option.”

Brokerage BTIG stated: “The uncertainty created by the reversal of [Padilla’s] stance makes the bond insurer stocks unbuyable until clarity around the situation develops and the magnitude of the losses the insurers stand to realise becomes more apparent.” It downgraded Assured Guaranty to “neutral” from “buy”.

BTIG’s Mark palmer told Bloomberg: ““The uncertainty around this situation has multiplied to such an extent that it’s very difficult for us to recommend that investors get involved here. The governor’s comments as they emerged last night represent a 180-degree change from where they had been a month ago.”