SAN JUAN – A day after announcing that Puerto Rico will not pay more than $400 million in Government Development Bank debt that came due over the weekend, Gov. Alejandro Garcia Padilla said on Monday that the island also does not have the money to pay some $2 billion in obligations with a due date of July 1.
That amount includes some $700 million in what are known as General Obligation bonds, which are guaranteed by Puerto Rico’s constitution.
“It is not expected that we will have the money,” and so “we invite (creditors) ... to negotiate in good faith,” said Garcia Padilla at a press conference.
If the United States does not approve some mechanism permitting the island to restructure its debt, Puerto Rico will be left without the ability to pay its guaranteed debt, a situation without precedent in the history of the territory that will surely lead to an endless number of lawsuits from bondholders.
“This has been a very difficult and painful decision, which I frankly would have preferred not to make,” but “the humanitarian crisis worsens each day,” Garcia Padilla said in an address on Sunday.
The governor blamed the United States for not providing assistance to Puerto Rico, which has $70 billion of debt and is mired in an economic recession, arguing that providing essential services was a priority.
Puerto Rico, a U.S. commonwealth, has been asking Congress for months for the legal tools to restructure its massive debt.
Garcia Padilla insisted Monday on the need for Washington to intervene before July 1 to approve some mechanism permitting the island to declare bankruptcy under the protection of federal legislation – from which it was excluded in 1984 – thus enabling it to undertake an orderly restructuring of its debt.
“If not, we will have to face countless lawsuits in the island’s – and U.S. – courts,” said the governor, a situation that would leave Puerto Rico “at the mercy of judges such as the one who recently preferred to give $115 million to Walmart rather than to Puerto Rico,” a reference to a lawsuit that the world’s largest retail chain filed against the island’s government over a marked hike in the taxes it collected from the firm.Treasury Urges Congress to Act to Avoid “Cascading Defaults” in Puerto Rico