Puerto Rico won’t make bond payments

SAN JUAN, Puerto Rico — Gov. Alejandro Garcia Padilla announced that Puerto Rico’s government will not make nearly $370 million in bond payments due Monday after a failure to restructure or find a political solution to the U.S. territory’s spiraling public debt crisis.

Garcia said Sunday that he had issued an executive order suspending payments on debt owed by the island’s Government Development Bank, a default that will likely prompt lawsuits from creditors and could be a prelude to a deadline to a much larger payment due July 1.

The governor said Puerto Rico can’t pay the bonds without cutting essential services.

Island officials spent the weekend trying to negotiate a settlement that would have avoided the default but apparently came up short. The development comes as Congress has so far been unable to pass a debt restructuring bill for Puerto Rico.

“Let me be very clear, this was a painful decision,” Garcia said in a speech. “We would have preferred to have had a legal framework to restructure our debts in an orderly manner.”

The Government Development Bank had $422 million in payments due Monday. Puerto Rico will pay $22 million interest and it reached a deal Friday to restructure about $30 million, leaving it short $370 million.

The administration also will be paying about $50 million in other debt payments due Monday owed by various other territorial agencies.

Garcia lashed out at the U.S. Congress for failing to pass a bill that would create a control board to help manage the island’s $70 billion debt and to oversee some debt restructuring

He said it has been held up by internal partisan and ideological divisions” in the House of Representatives.

“We can’t wait longer,” he said. “We need this restructuring mechanism now.”