There had been speculation Puerto Rico would default on all or part of the $355 million notes issued by its financing arm, the Government Development Bank.
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“Today’s debt service payments reflect our commitment to honor our obligations notwithstanding the extreme fiscal challenges we face in an effort to facilitate a voluntary restructuring process with our creditors”, said Melba Acosta, the GDB president, in a news release. Officials said they expect that up to $329 million will be diverted through June to pay off the debt. We have no cash left.
“This is a distress call, and it’s serious”, he added.
Sen. Orin Hatch, R-Utah, believes that before Congress can move forward on any of kind of relief package for Puerto Rico, it needs to see independent verification of the territory’s finances.
According to the Administrative Office of the U.S. Courts, Chapter 9 bankruptcy provides “a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts”.
Before the payment, many observers thought the USA territory would default on its payment.
That is why, starting today, the commonwealth of Puerto Rico will have to claw back revenues pledged to certain bond issues in order to maintain essential public services.
With Puerto Rico shut out of the capital markets, the crisis is reaching a breaking point.
Many creditor groups oppose allowing Puerto Rico’s debt to be reorganized in bankruptcy, saying that the government could do more to privatize public assets and otherwise raise revenue and reduce spending. Rubio and Jeb Bush have both told Puerto Ricans they’re behind the territory’s bid for statehood, which some 60% of the island’s residents support. Through its subsidiary National Public Finance Corp., MBIA insures the general obligation-guaranteed portion of the bank’s debt payment.
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The Obama administration has said that Puerto Rico’s economic woes could quickly turn into a humanitarian crisis unless Congress adopts a blueprint for dealing with the island’s crushing debt burden. Coffee and sugar once fueled its economy, and as agriculture diminished, Puerto Rico got an economic boost from federal tax incentives that lured manufacturers, especially pharmaceutical companies, from the USA mainland.
