Puerto Rico’s money woes get even worse
Won’t be able to pay $37.3M it owes to bondholders Monday
Puerto Rico is set to tumble deeper into default from its crushing debt load Monday when it is expected to fail to meet a deadline to make payments to two major creditors.
Puerto Rico Gov. Alejandro García Padilla told reporters Wednesday that the island will not pay $37.3 million owed to bondholders Monday and will begin withholding cash from a trust fund devoted to future payments.
The move heightens tensions between the U.S. territory and its creditors and adds a fresh layer of urgency to the debate in Washington over how to resolve the island’s debt crisis.
It comes about five months after Puerto Rico first defaulted on $57.3 million in debt, delivering a sharp jolt to the municipal credit markets that long funded the island’s borrowing binge.
For years, Puerto Rico’s popu- lation has contracted amid an economic crisis, heavy taxation, inefficient government and soaring debt bills. The island, whose residents are U.S. citizens, is facing some $71 billion in bond debt and an estimated $44 billion unfunded pension shortfall, according to U.S. Treasury Department estimates.
García Padilla on Wednesday reiterated his call for Congress to create a new legal framework for the island to negotiate with its creditors. He has previously called on lawmakers to open Chapter 9 bankruptcy to Puerto Rican municipalities. The Obama administration has expressed support for a Congressional push to provide debt-relief capacity.
García Padilla said the island would not make two specific payments owed Monday: $35.9 million to the Puerto Rico Infrastructure Financing Authority and $1.4 million owed to the Puerto Rico Public Finance Corp.