Puerto Rico Governor suspends payments on infrastructure debt

Puerto Rican Governor Alejandro Garcia Padilla late on Friday declared a suspension of any payments on some debt issued by the U.S. territory’s infrastructure financing authority, citing the authority granted under a local emergency debt moratorium law.

Garcia Padilla signed an executive order that applies to “certain Puerto Rico Financing Authority (PRIFA) notes,” a statement from the government said.

“With this action, all obligations to transfer revenues or funds related to the PRIFA BANs (bond anticipation notes) are suspended,” the statement said.

Garcia Padilla said in the statement that the PRIFA notes were now covered obligations “pursuant to the Puerto Rico Emergency Moratorium and Rehabilitation Act,” which the Puerto Rican legislature passed in April.

That act grants the governor the authority to declare a moratorium on any debt payment he deems necessary. However, creditors have filed lawsuits in the U.S. courts, calling the measure illegal as Puerto Rico, and its debt, is subject to U.S. statutes rather than local law.

Puerto Rico, with 3.5 million U.S. citizens, a 45 percent poverty rate and rising emigration to the mainland that cuts into economic growth, has $70 billion worth of debt is says it cannot repay in full.

Earlier this month, the U.S. House of Representatives passed legislation aimed at creating a federal oversight board to oversee a restructuring of the island’s debt, while putting in place a suspension on any past and future lawsuits related to the non-payment of some of its debts.

The U.S. Senate is slated to vote on the measure before Puerto Rico is scheduled to make July 1 debt payments of nearly $2 billion. President Barack Obama’s administration has backed the measure, calling it a compromise deal.

Garcia Padilla reiterated his desire for the senate to pass the bill known as the “Puerto Rico Oversight, Management and Economic Stability Act,” or PROMESA.

“In facing this crisis, we urge the U.S. Senate to act on PROMESA, which although imperfect, offers an effective solution to address the fiscal emergency we face,” Garcia Padilla said.

Source: Reuters