Borinquen Bonkers! San Juan Defaults On $300M+ In Debt Despite Feds Restructuring Deal
SAN JUAN — Puerto Rico’s government announced today another multimillion-dollar default as the crisis-wracked U.S. commonwealth seeks to restructure nearly $70 billion in public debt.
The government said it missed $312 million worth of bond payments including $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 $156 million in liquidity.
The government said the remaining payments missed involve general obligation bonds backed by the island’s U.S.-backed constitution and those issued by Puerto Rico’s public finance and infrastructure agencies.
However, the U.S. commonwealth paid $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.
Gov. Ricardo Rossello and his predecessor have favored 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 $800 million for debt payments when more than $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 Tuesday in a televised address that he has signed 18 executive orders since becoming governor last month that will save the government some $118 million a year. Among the orders was to cut government operation costs and contracts for professional services by 10 percent. The board, however, has demanded that the governor take further action.
Puerto Rico’s government said it will miss some debt payments due on Wednesday, including another payment on general obligation (GO) bonds backed by its constitution.
In a statement on Wednesday, the Fiscal Agency and Financial Advisory Authority (FAFAA) said the island will miss the GO debt payment; payments owed at Puerto Rico’s public finance and infrastructure agencies; and $279 million owed by its Government Development Bank.
Puerto Rico has been defaulting on debt periodically for more than a year, including on GO debt, and the missed payments were expected.
FAFAA said Puerto Rico will make full payments due Wednesday on so-called COFINA debt, which is backed by sales tax, as well as payments owed by the island’s retirement system, water authority, municipal finance authority and industrial development agency.
Puerto Rico is facing $70 billion in total debt, and nearly half its 3.5 million residents live in poverty.
New Gov. Rossello, sworn in on Jan. 2, on Sunday signed a law to ensure the government continues to provide essential services.
Rossello has said paying debt is also crucial, and has proposed a number of measures to reduce government spending to free up cash for debt payments.
Still, the island likely cannot afford to pay its debt in full, and is in talks with bondholders to restructure.