But as the US commonwealth made its $355 million payment for the month, Gov. Alejandro García Padilla announced his government would take revenue pledged to certain bonds next year in order to pay for the government’s day-to-day operations. Richard Blumenthal, D-Conn., speaking at a Senate Judiciary Committee hearing on the island’s fiscal crisis, as saying it required “financial gymnastics” for the San Juan government to meet a Tuesday deadline to pay one of several allotments of debt owed to creditors. Puerto Rican officials are aware that a default could risk creditors’ cooperation on the superbond, and are likely to make the December and January payments to keep talks alive, said the source, as well as another person familiar with discussions.
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Some Puerto Rico bonds maturing in 2035 traded at about 75 cents on the dollar, up from around 71.75 cents Monday, according to the Electronic Municipal Market Access website.
Puerto Rico is negotiating with bondholders over restructuring the commonwealth’s debt, which exceeds $70 billion, and paid only a fraction of around $58 million due in August. “We have taken this hard step in the hope that Congress will act soon”.
The U.S. commonwealth is staggering beneath $72 billion debt amid a historic economic crunch.
But he said the island is running out of cash. Garcia Padilla didn’t say during his testimony before the Senate Judiciary Committee in Washington whether the $354 million in payments due Tuesday would be made.
“Let us be clear: we have no cash left”, Padilla said.
Even with the clawback, Puerto Rico may not be able to make all its payments, according a November 6 financial filing.
Garcia Padilla told the Senate panel that Puerto Rico’s situation is hampered by creditors which have not agreed to reschedule its debt and by USA laws which prohibit the territory from entering bankruptcy protection.
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“Puerto Rico’s debt crisis didn’t happen overnight, it’s been years in the making”, said Senator Chuck Grassley, who chairs the committee at Tuesday’s hearing. It has proposed a territorial bankruptcy regime that would allow Puerto Rico to restructure its debt and impose new oversight on finances, expand Medicaid benefits and allow residents to qualify for the same low-income tax credits that are offered to other American citizens through the Earned Income Tax Credit.
