Puerto Rico avoids default on debt payment

Puerto Rico said it made a December 1 debt payment but warned that the threat of default loomed. However he stated the island is running out of money.

Puerto Rico first defaulted on a payment in August, when a fraction of a $58 million allotment was paid to creditors with the island’s Government Development Bank.

Moody’s Investment Service last month said it was “likely” Puerto Rico would default on at least some of the debt, and Garcia Padilla has said that if forced to choose between paying debt and providing services, Puerto Rico would default.

Puerto Rico said Tuesday it had made a $354 million bond payment after threatening for days to default as it seeks legislation to permit it to enter bankruptcy restructuring.

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. “However, the Commonwealth’s overall fiscal position remains tenuous”.

“We’ll start to see things quickly unwind and then everything goes back to the U.S. Congress. They are the only ones who have the ability to actually legislate and give Puerto Rico the tools to address the financial stress they are under”. In the following weeks, we will continue to have discussions with our creditors about supporting the creation of a sustainable path forward for the Commonwealth.

“In simple terms we have begun to default on our debt in an effort to attempt to repay bonds issued with full faith and credit of the commonwealth and secure sufficient resources to protect the life, health, safety and welfare of the people of Puerto Rico”, Garcia Padilla told the Senate Judiciary Committee.

More important, it wants Congress to change laws barring it from declaring bankruptcy, insisting it’s the only way out of the fiscal trap Puerto Rico finds itself in. Richard Blumenthal, D-Conn., said it required “financial gymnastics” for Puerto Rico to clear Tuesday’s much smaller deadline. Come Jan. 1, the money runs out.

Puerto Rico’s tax-free, high-risk bonds have been used for years by municipal fund managers to boost yields.

It does need Congress’ assistance to deal with its debt.

In recent years, the island’s government has gone to unusual lengths to cut spending and raise revenue.

Kandrach added that the governor had spent hundreds of millions of dollars on consultants, something 60 Plus thinks he should have thought about before coming to Congress for financial help.