The Puerto Rico House of Representatives voted 35-4 to exempt certain debt from eligibility from a payment moratorium it passed on April 6.
The representatives' vote on Monday was quickly followed by a statement by Gov. Alejandro García Padilla threatening to veto the bill.
The representatives voted to exempt payments on the commonwealth's general obligation, guaranteed, and securitized debt from eligibility for the suspension. An example of the last type of debt would be the debt from the Puerto Rico Sales Tax Finance Corp. (COFINA). The House voted 35-4 in favor, with 11 members absent.
Amending the moratorium bill to exempt GOs "doesn't make sense to me," said an analyst following Puerto Rico bonds, who commented anonymously citing his firm's policy. "The moratorium would be nearly meaningless unless they can default on the GOs. They owe about $800 million in July [for the GO bonds]."
The battle over the debt payment moratorium highlights the urgency of Puerto Rico's fiscal crisis, as U.S. Congress members continue to debate competing plans to help the territory.
García Padilla said the payment moratorium "provides us with some of the tools to ensure continuity of basic services that the government provides to [Puerto Rico]," according to a press statement. "The decision taken by the House goes against those premises and it should be indicated that such a measure would have to be vetoed."
The measure in the House has been referred to the Puerto Rico Senate.
Senators of the majority party, the Popular Democratic Party, will meet to discuss the House amendments, Puerto Rico Senate President Eduardo Bhatia Gautier said in a statement. "As soon as there is consensus in our actions regarding these amendments or any other measure to help address the fiscal challenges of the country, we will notify you. Our guiding principle remains to prevent cuts to basic services to citizens while taking care of the fiscal situation facing [Puerto Rico.]"
A source in the Senate said she expected the body to vote on the moratorium exception amendments next week. She said without a consensus it would be hard to have the Senate pass anything. She indicated that Bhatia Gautier may be skeptical of the debt moratorium exceptions.
After the debt payment moratorium passed, legislators became concerned about its possible impact on the island's municipalities and cooperatives, the Senate source said. The Government Development Bank for Puerto Rico owes municipalities money in the form of loans that have been approved but not fully disbursed yet. Puerto Rico public sector entities owe the cooperatives money in the form of bond payments.
The House passed two bills amending the moratorium bill Monday, one applicable to the municipalities and to certain classes of debts and the other with measures affecting the cooperatives.
If the Senate also passes an exemption for certain types of debt from the moratorium and the governor vetoes, the legislature could override the veto. The House would need 34 votes from its 51 representatives to do this and the Senate would need 18 votes from its 27 senators.
After the governor's statement Monday night, an argument developed between the governor and Rep. Rafael Hernández Montañez. In separate interviews with Puerto Rico radio station NotiUno 630, Hernández Montañez said that the governor had promised him that if he voted for the debt moratorium the governor would be willing to later sign amendments that would exempt the guaranteed and trust (or "securitized") debt. The representative said that by threatening a veto of the amendments, the governor was breaking his promise.
The governor told the radio station that this is not the case. He said his only promise was that if the bill was amended to give GO holders five days-notice of nonpayment, he would sign it.
Bill 2864 to exempt certain classes of debt from the moratorium was opposed by four members of the majority Popular Democratic Party. Two members of the PDP were absent. An additional eight members of PNP were absent. All the rest of the members of the House voted in favor.
