Puerto Rico Default Likely on Upcoming Bond Payments, Says Governor

By The Associated Press
The Associated Press
The Associated Press
December 9, 2015 Updated: December 9, 2015

SAN JUAN, Puerto Rico—Puerto Rico’s governor said Wednesday that it’s probable the U.S. territory will be unable to make more upcoming debt payments because it has no more money amid a worsening economic crisis.

Gov. Alejandro Garcia Padilla spoke during a trip to Washington to meet with Republican legislators and others before a possible vote by Congress on Friday on whether to allow Puerto Rico public agencies access to Chapter 9 bankruptcy provisions.

Puerto Rico faces more than $900 million in bond payments in January, including a $357 million general obligation bond payment due Jan. 1. It would be the island’s first major default if the payment is not made. Puerto Rico’s Public Finance Corporation already missed a $58 million bond payment in August.

“If I have to choose on Jan. 1 between paying the salary of Puerto Rico workers, or paying bondholders, I will pay the Puerto Ricans,” Garcia said. “It’s that simple. They will have to go to court to force me to do the opposite.”

Garcia did not directly answer a question about whether the government could make the Jan. 1 payment if Congress approves the measure. He only said it would give Puerto Rico the flexibility to talk with creditors out how to make upcoming payments.

Puerto Rico recently made a $354 million bond payment even though officials said they were running out of money and warned of a possible government shutdown. Some investors have accused Garcia’s administration of exaggerating the financial crisis to evade payment.

Antonio Weiss, counselor to the U.S. Treasury Secretary, urged Congress on Wednesday to approve a package that includes a debt-restructuring mechanism for Puerto Rico. He said basic services on the island have not been cut yet because the government in part has deferred payment of $300 million in tax refunds and borrowed $400 million in emergency loans.

“Resolving Puerto Rico’s crisis requires congressional action,” he said.

Senate Democrats, however, failed on Wednesday to unanimously approve a bill that would allow Puerto Rico access to Chapter 9. Republican Sen. Orrin Hatch of Utah announced he would file a bill later Wednesday addressing the island’s economic crisis.

At the same time, the U.S. Supreme Court announced last week that it would hear an appeal on a ruling that barred Puerto Rico from giving municipalities the power to declare bankruptcy.