Puerto Rico avoids default on $355 million debt payment

The commonwealth said in the 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 for paying down general-obligation securities. Richard Blumenthal, D-Conn., speaking at a Senate Judiciary Committee hearing on the island’s fiscal crisis, as saying it required “financial gymnastics” for the San Juan government to meet a Tuesday deadline to pay one of several allotments of debt owed to creditors.

Puerto Rico officials have not yet said where they obtained the money to make the $355 million payment due Tuesday.

“The Government Development Bank will make an announcement in a few minutes or maybe hours about the payment, ” Garcia Padilla said to reporters after his testimony. Puerto Rico’s next challenge comes January 1 when various Puerto Rican entities must pay $1 billion to creditors.

Puerto Rico has avoided default on its debt – for now.

Moody’s ratings agency said in a statement that the bank’s payment does not change Moody’s ratings or outlook for Puerto Rico’s debt. “We have taken this hard step in the hope that Congress will act soon”. He also pointed out that an exodus of professionals to the USA mainland is shrinking the tax base.

“Let us be clear: We have no cash left”, he said.

But this is far from the end of Puerto Rico’s financial troubles.

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. He asked lawmakers to enact legislation to give the territory more equitable treatment under federal programs and authorize Puerto Rico to restructure a meaningful portion of its debt.

“Those bonds in many ways have reflected the expectation that they would at some point in time have to claw back some of those revenues”, Hayes said. Here’s a brief explanation of how Puerto Rico accumulated so much debt, how its territorial status complicates matters and how it could emerge from a almost decade-long economic slump.

Ironically, Puerto Rico had the right to file for bankruptcy before 1984, when Congress amended federal law to specifically deny the island that recourse.