Sun | Jul 22, 2018

Puerto Rico defaults on multimillion-dollar debt amid crisis

Published:Friday | February 3, 2017 | 12:00 AM

Puerto Rico's government on Wednesday announced another multimillion-dollar default as the crisis-wracked United States territory seeks to restructure nearly US$70 billion in public debt.

The government said it missed US$312 million worth of bond payments including US$279 million owed by Puerto Rico's Government Development Bank, which oversaw debt transactions until falling into a fiscal state of emergency itself. Officials warned the bank only has about US$156 million in liquidity.

The government said the remaining payments missed involve general obligation bonds backed by the island's constitution and those issued by Puerto Rico's public finance and infrastructure agencies.

However, the US territory paid US$295 million worth of interest due on some debt, including a portion backed by a local sales tax and on bonds issued by agencies, including the Aqueduct and Sewer Authority and the Highways and Transportation Authority, according to spokesman Elliot Rivera.

Both Governor Ricardo Rossello and his predecessor have favoured payments to those holding bonds backed by a local sales tax versus general obligation bondholders.

"It's very difficult to please everybody," said economist Vicente Feliciano, noting that a federal control board that oversees Puerto Rico's finances is seeking to set aside US$800 million for debt payments when more than US$3 billion will be due in upcoming years.

The board recently extended a litigation stay to May 1 that protects the island from creditor lawsuits amid ongoing defaults. It also extended a deadline for Puerto Rico to submit a revised fiscal plan expected to contain several new austerity measures.

Rossello signed a new law this week that calls for partial debt payments if there is any money left over after providing essential government services, including education, health and security.

Rossello said on Tuesday in a televised address that he has signed 18 executive orders since becoming governor last month that will save the government some US$118 million a year. Among the orders was to cut government operation costs and contracts for professional services by 10 per cent. The board, however, has demanded that the governor take further action.

- AP