Puerto Rico skips bond payments, says Congress must come to its aid

SAN JUAN, PUERTO RICO >> A spiraling Puerto Rico debt crisis reached a new milestone as the island missed nearly $370 million on a bond payment Monday and officials warned of worse to come if the U.S. Congress doesn’t help it dig out from a mountain of debt.

The default was the largest in a series of missed payments by the struggling U.S. territory since last year and Gov. Alejandro Garcia Padilla warned it was unlikely to be the last.

Puerto Rico has payments totaling nearly $2 billion coming due on July 1, including about $700 million in general obligation bonds that are supposed to be guaranteed under the island’s constitution. In an ominous warning directed at Congress and creditors that include U.S. hedge funds, Garcia said the outlook for the next payment is bleak.

“We don’t anticipate having the money,” he told a news conference in the capital, San Juan.

The remedy, Garcia warned, is either a restructuring arrangement with creditors or legislation from Congress. U.S. lawmakers left for recess last week while a bill that would restore Puerto Rico’s legal authority to restructure as states are able to do and set up a fiscal control board was stalled in committee.

Garcia, who inherited the crisis when he took office in January 2013, blamed lobbying by “vulture” hedge funds and what he called “racist” attitudes toward Puerto Rico.

“Our worst enemy at the moment is politics,” he said.

White House spokesman Josh Earnest said Monday’s default should be another red flag for Republicans in Congress. “This situation requires an urgent response and Republicans in Congress have been dragging their feet for too long,” Earnest said.

The White House has put forward a plan that would allow Puerto Rico’s government to restructure its debt and impose new oversight on finances, among other measures. Earnest said the oversight measures distinguish the proposal from a bailout — a charge Republicans have lodged against the plan. But, Earnest warned, continued delay in Congress “only makes a bailout more likely.”

Following Monday’s default, U.S. Treasury Secretary Jacob Lew released a letter to House Speaker Paul Ryan in which he urged him to work quickly to resolve the “few outstanding issues” on the legislation to help Puerto Rico.