SAN JUAN Puerto Rico’s House of Representatives on Tuesday debated a bill to halt debt payments, while a government official fired back at creditors who suggested the U.S. territory was shirking efforts to hold restructuring talks.
Burdened by a $70 billion debt load it says it cannot pay and a 45 percent poverty rate that has led to a steady exodus of its American citizens to the mainland, Puerto Rico faces economic collapse without a solution that either changes laws and/or involves an agreement with creditors.
The next key date is May 1 when the Government Development Bank, the island’s primary fiscal agent, is due to pay creditors $422 million.
The island’s Senate passed an emergency bill early on Tuesday that would alter GDB’s structure, as well as allow Governor Alejandro Garcia Padilla to declare a moratorium on any debt payment he deems necessary. The House was expected to vote on the bill on Tuesday.
A group of Puerto Rico’s general obligation bondholders criticized the bill.
“It is no coincidence that the governor has abruptly sought overnight adoption of debt moratorium legislation at the very moment large general obligation bondholders were arriving on the island to pursue a consensual restructuring,” the creditors said in a statement on Tuesday.
That group, holding about $5 billion debt, then released a proposed restructuring plan that would defer principal repayments and offer new debt, a plan they say would save Puerto Rico from default.
GDB President Melba Acosta disputed the notion that officials were blowing off creditors, saying Puerto Rico held meetings with creditors in March, presenting updated restructuring proposals.
“We have not received an actionable, binding financing commitment from anyone, and we have received no offers that would lead Puerto Rico towards a stable and prosperous economy for years to come,” Acosta said in a statement to Reuters.
“We sincerely hope that the ‘proposals’ that the advisers to our GO holders speak of are not a public relations stunt that attempts to mislead the public and distract leaders in Congress from the real work at hand,” she added.
GDB is also holding consensual restructuring talks with its own creditors. Legislative efforts in the U.S. Congress to fix Puerto Rico’s debt problem are not likely to come to fruition before the GDB’s May 1 debt payment.
On Monday, some GDB creditors sued to try to prevent a run on the bank as negotiations play out, asking a court to bar the GDB from paying certain creditors and preventing depositors from withdrawing money.
A source close to the matter told Reuters some government agencies were planning to open new accounts at other banks, but denied those agencies were removing money from the GDB.
(Reporting by Nick Brown; Editing by Daniel Bases and Peter Cooney)