SAN JUAN – Puerto Rico’s government has declared a state of emergency at the U.S. commonwealth’s debt-ridden ACT highway authority, a move that suspends that agency’s obligation to transfer its revenues to bondholders.
Gov. Alejandro Garcia Padilla announced the decision in a statement released Wednesday, saying he was using powers granted to him under the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act, which he signed into law in April.
He justified the move, which does not impose a moratorium on bond payments by the authority, as necessary for the ACT to pay its suppliers and ensure maintenance of the island’s road network.
The state-of-emergency declaration suspends the agency’s obligation to transfer highway tolls and other revenues to its creditors and imposes a stay on lawsuits for non-payment of debt.
The governor said in a statement that the ACT’s debt load dates back to the period from between 2009 and 2012, when the authority filled a budget hole and covered its capital investment needs through credit lines with the Government Development Bank for Puerto Rico without identifying payment sources for the debt.
The authority’s total debt currently amounts to around $2.2 billion.
The ACT, he said, needs around $25 million a month to cover its operational costs and provide essential road services to the island’s population.
It also needs nearly $150 million to pay what it owes to its suppliers, he added.
The Puerto Rico Emergency Moratorium and Financial Rehabilitation Act authorizes the government to halt all payment on the island’s debt, including General Obligation, or GO, bonds, repayment of which is backed by Puerto Rico’s constitution and is to take priority over any other public expenditures.
Puerto Rico has been in recession for a decade and is racked by a severe fiscal crisis that led it to default on most of a $422 million debt payment earlier this month. An additional $2 billion comes due in early July.
Garcia Padilla’s administration has said it will be forced to default on more bond payments unless the U.S. Congress gives it the legal tools to restructure its roughly $70 billion debt load.