Puerto Rico will default on $37 million in payments owed to creditors

Printed from: http://newbostonpost.com/2015/12/30/puerto-rico-will-default-on-37-million-in-payments-owed-to-creditors/

SAN JUAN, Puerto Rico (AP) — Puerto Rico will default on $37 million in payments due to creditors Friday, while it will make $594 million in other payments owed next week, the U.S. commonwealth’s governor said Wednesday.

Gov. Alejandro Garcia Padilla said that the payments to be made include $329 million to holders of general-obligation bonds. He said there is no money to make a $400 million payment that will come due in May on Government Development Bank bonds.

The island has been in an economic decline for nearly a decade and is struggling with $72 billion in public debt that Garcia has said is unpayable and needs to be restructured. The government can’t take advantage of federal bankruptcy laws without an act of Congress.

Puerto Rico recently made a $354 million bond payment, but the island’s Public Finance Corp. missed a $58 million bond payment in August.

Garcia said that the commonwealth needs Congress to act and give the territory access to federal bankruptcy laws.

“I’m not asking for a bailout,” he said. “I’m asking for the tools to address the problem.”

Garcia said the government will be forced to default on $35.9 million in Puerto Rico Infrastructure Financing Authority debt and $1.4 million of Public Finance bonds. He said the bonds are not protected by the U.S. territory.

This is the second time that Puerto Rico has defaulted on Public Finance bonds. The government last missed a $58 million payment in August.

Garcia has stressed that the government’s priority is to maintain operation of basic services including schools, hospitals and police stations.

“Puerto Rico is going to pull through,” he said. “These decisions are made to protect Puerto Ricans.”

While Puerto Rico is still pursuing access to a bankruptcy court, U.S. House Speaker Paul Ryan, a Republican from Wisconsin, has pledged that the House of Representatives will come up with “a responsible solution” for the island’s debt problems next year. In addition, The U.S. Supreme Court announced recently that it would hear an appeal on a ruling that barred Puerto Rico from letting municipalities declare bankruptcy.

But immediate relief is needed, said Eric LeCompte, executive director of the debt relief organization Jubilee USA.

“No matter what the outcome is from the U.S. Supreme Court or even from Congress, it won’t come in time to prevent a default and further austerity from taking place in Puerto Rico,” he said in an interview.

The government has already increased taxes, closed schools, withheld tax refunds and taken numerous other measures to cut costs and generate more revenue amid a worsening economic crisis. Garcia said government officials will start meeting with creditors early next month for debt-restructuring talks.

The island’s heavily indebted public power company earlier this month reached a separate debt-restructuring deal with its creditors that forgives a portion of its $9 billion owed.

Written by Danica Coto