Puerto Rico has managed to make a payment due today on its bond debt, but officials are warning that the commonwealth’s fiscal position remains tenuous.
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Puerto Rico’s governor, Alejandro J. Garcia Padilla, who testified at the hearing, detailed a series of emergency measures the island has taken to pay off its creditors, such as not paying tax refunds, and liquidating pension system assets.
It (Other OTC: ITGL – news) said that Garcia Padilla had signed a new executive order permitting revenues heretofore committed to debt service by state enterprises to be diverted to pay directly issued government debt. The government warns that its general fund could run out of money by year’s end.
El gobernador de Puerto Rico Alejandro Javier García Padilla atestigua ante el Comité de Asuntos Jurídicos del Senado de Estados Unidos sobre los problemas fiscales de la isla, el 1 de diciembre del 2015.
The payment included about $270 million of payments to general obligation bondholders, whose right to repayment is backed by a constitutional guarantee.
Garcia Padilla said that the government was analyzing the impact that making the payment would have on essential government services.
Blumenthal, along with New York’s Chuck Schumer, is co-sponsor of the new bankruptcy bill for Puerto Rico.
Puerto Rico’s debt-ridden government is walking a tightrope trying to avoid default and, at the same time, avoid unpopular austerity measure that might further sink the island territory’s floundering economy.
As for the Development Bank for Puerto Rico’s (GDB) debt, the governor said any development depends on what comes out of negotiations with island creditors.
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”.
“This is a distress call”, he said.
Moody’s said the ratings agency would “continue to view default as likely on future commonwealth debt payments”.
The commonwealth said in a November 6 financial filing that it may take revenue already used to repay Highways and Transportation Authority bonds, convention-center debt, and Puerto Rico Infrastructure Financing Authority bonds and redirect that money to pay down general-obligation securities.
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Pedro Pierluisi, Puerto Rico’s delegate to Congress, told senators at the hearing that the federal government’s policies toward the territory are “inequitable and incoherent” and have made it impossible for the island to prosper.
