Calling on Congress to take swift action to create a debt restructuring mechanism and saying resources are “scarce,” Puerto Rico Gov. Alejandro García-Padilla confirmed Sunday he has ordered a moratorium on the debt service payments due from the Government Development Bank.
The government’s fiscal agent has $423 million pending, of which it will pay $22 million in interest, the Associated Press reported. The bank also reached an agreement Friday with island credit unions to defer $33 million until May 2017.
Meanwhile, the government will reportedly pay $47 million due from six other credit-issuing entities, falling about $367 million short of the month’s total obligation payment.
“In light of Congress’s inaction, we were forced to enact Law 21 to protect the education, health and public safety and other essential services of our citizens from creditors,” García-Padilla said in a televised message Sunday night.
“Let me be very clear, this was a painful decision. We would have preferred to have had a legal framework to restructure our debts in an orderly manner,” he said, calling on U.S. House Speaker Paul Ryan to “exercise his leadership and honor his word” of passing legislation to establish a debt restructuring mechanism to help the Commonwealth address its financial liabilities.
“Almost a year ago, we were forthright in announcing that Puerto Rico could not pay its $70 billion debt without restructuring it and Congress’s assistance,” he said. “In our efforts to avoid a humanitarian crisis, we have repeatedly traveled to Washington to convey the urgency of the situation. We have testified before Congress on multiple occasions.”
Now, he said “resources are so scarce that we are struggling to pay the fuel supplier for the police patrol cars and emergency response vehicles. At this point, we simply don’t have enough money to pay for all these services and pay our creditors.”
Over the past several weeks, the GDB had been in talks with its creditors in an attempt to restructure its debt service payment, shuttling proposals and counter-proposals back and forth. While less than 10 days ago, the agency said it was confident it would reach an agreement with bondholders, that was to be announced last week, that did not materialize.
“We will continue working to try to reach a consensual solution with our creditors. That is one of our commitments. But what we will never do is put the lives and safety of our people in danger,” García-Padilla said.
Because this month’s payment fell on a Sunday, the government technically has until today to still meet its obligation, or reach an agreement with creditors, sources have said.