Puerto Rico's Senate is set to approve a bill Tuesday that would allow the governor to retain the right to declare debt payment moratoriums on virtually all of the island's debt, according to the Senate's leader.
The Senate won't vote for an exemption for guaranteed and Puerto Rico Sales Tax Finance Corp. (COFINA) debt, Puerto Rico Senate President Eduardo Bhatia Gautier said Monday. The exemption would be in an amendment to a bill allowing the governor to declare a debt payment moratorium, which was signed into law on April 6.
Instead they will consider amending the bill so that the governor couldn't declare moratoriums for debt with terms altered through agreements with creditors, such as that of the Puerto Rico Electric Power Authority.
Bhatia Gautier said senators in his Popular Democratic Party, who hold the majority of seats in the senate, had decided not to include an exemption for the general obligation, guaranteed, and "trust" debts like COFINA as part of an amendment to a debt payment moratorium.
The Puerto Rico House of Representatives had voted for such an exemption on April 18. In the event the Senate passes a more limited exemption, the two bills would have to be reconciled. Gov. Alejandro García Padilla has threatened to veto the House bill.
On April 6 García Padilla had signed a law, passed by both Puerto Rico's House and Senate, to allow him to declare a payment moratorium on nearly all of Puerto Rico's public sector debt.
PDP senators agreed to endorse, with some changes, House draft amendments to the debt payment moratorium that address issues for the island's financial cooperatives and municipalities. A House amendment specifies the conditions in which municipalities can withdraw money from the Government Development Bank for Puerto Rico, according to Puerto Rico Rep. Rafael Hernández Montañez.
A separate House amendment says that those cooperatives with higher exposure to Puerto Rico as a percent of their assets would get priority for payback. Puerto Rico owes the cooperatives about $1.1 billion, according to an attorney representing the institutions, which are similar to credit unions.
However, the senators "decided not to amend the portion [of the debt moratorium law] excluding the general obligation and COFINA debt, as a matter of consistency," Bhatia Gautier said. "The government of Puerto Rico is asking the U.S. government to approve legislation allowing all debt restructuring. Therefore, locally we should not be legislating to exclude part of that debt."
The PDP senators agreed to amend the debt payment moratorium bill so that the governor could not declare moratoriums on debt payments for debt with creditor agreements. If the agreement between the Puerto Rico Electric Power Authority and its creditors goes forward, it would be covered under the amendment.
Puerto Rico's government passed the debt payment moratorium bill to deal with not having enough money to pay for substantial payments due in the next few months. Puerto Rico public sector bodies owe $470 million on May 2 and $1.9 billion on July 1.
Also on Monday afternoon, Bhatia Gautier said some PDP senators were having doubts about a proposed securitization mechanism for the Puerto Rico Aqueduct and Sewer Authority. At 3 p.m. PRASA president Alberto Lázaro met with the senators to answer some questions. At the meeting he promised to provide them some information to answer questions in the next few days, a Senate source said.
The Senate will probably vote on a bill for PRASA next week, this source said.
