Puerto Rico Gov. Alejandro García Padilla is pushing Puerto Rico legislators to let him retain the right to halt all debt payments starting July 1 as they consider legislation to amend the payment moratorium bill signed earlier this month.
On Monday morning the governor made clear he will insist on retaining flexibility about paying all types of the debt, including general obligations, according to a source in the governor's office.
The moratorium bill signed April 6 gave García Padilla the authority to suspend payments on debt backed by the government, the island's Government Development Bank and other public agencies through January 2017.
On April 7 Puerto Rico Rep. Rafael Hernández Montañez submitted a bill that would exempt the commonwealth's general obligation, guaranteed, and securitized debt from eligibility for the suspension. An example of securitized debt would be the debt of the Puerto Rico Sales Tax Finance Corp. (COFINA).
On April 8 Hernández Montañez said the governor had promised him that if the representative voted for the debt payment moratorium bill, which he did, and if the representative got a bill through the Puerto Rico House and Senate exempting some of the debt, then he (the governor) would sign the bill.
García Padilla said Monday that if July 1 arrives and Puerto Rico has not reached an agreement with its bondholders and doesn't have the money to pay the GO's, then he needs the right not to pay them, the source said.
Puerto Rico's public sector entities have about $1.9 billion in debt payments due on July 1. Included in this is $777 million in GO debt payments, according to Standard & Poor's.
The governor is seeking to change the Hernández Montañez-sponsored amendments.
Puerto Rico's government is in tight financial circumstances. The island's public sector entities have about $70 billion in debt. The government is far behind in paying its operating bills and tax refunds and has taken a variety of steps to keep running including stopping setting aside money for the GO payment. The governor has said that he doesn't expect the GDB to have enough money to make its full debt payment on May 1. This payment has been reported as $423 million and as $433 million.
García Padilla has said since November 2015 that he would prioritize giving money for the provision of essential services over the payment of the debt, including the guaranteed debt. Puerto Rico's constitution gives first claim of the government's money to the guaranteed debt.
Democratic and Republican legislators in the U.S. Congress are working on a bill that might impose a control board on Puerto Rico and allow a restructuring of the commonwealth's debt. If this were to pass, it could supersede any of the governor's plans.
