Puerto Rico Faces “Public Unrest” As Cash Crunch May Leave Government Workers Unpaid
Heavily indebted Puerto Rico was due to meet with representatives of its creditors on Friday in a desperate attempt to forge ahead with a plan to restructure some $72 billion in debt. No offer is expected to be made at the meetings in New York, but the commonwealth’s Government Development Bank says it hopes to provide creditors’ advisors with greater clarity on “the proposed restructuring process,” which GDB says “is a comprehensive plan that will benefit all parties while supporting the creation of a sustainable path forward.”
As Reuters notes, “creditors have been resistant to cuts to their repayment, insisting that Governor Alejandro Garcia Padilla’s administration do more to curb spending, boost government efficiency and promote economic growth.”
The GDB is facing a $354 million principal and interest payment on December 1 – some $270 million of that is GO debt guaranteed by the National Public Finance Guarantee Corp. Defaulting on that is bad news and as Moody’s warned earlier this month, a missed payment on the commonwealth’s highest priority obligations “would likely trigger legal action from creditors, commencing a potentially drawn-out process absent swift federal intervention.”
Another $303 million comes due one month later on January 1.
GDB called Friday’s meeting with consultants and advisers “part of our continued effort to maintain a constructive and open dialog with our key stakeholders” while a spokesperson for the governor promised Puerto Rico is doing everything in its power to make the December 1 payment although Padilla has repeatedly made clear that if it comes down to defaulting or cutting off services to the people, bondholders will be out of luck.
Here’s a bullet point summary of recent developments from BofAML:
- On 6 November, Puerto Rico released its unaudited quarterly financial and operating report. In the report, Puerto Rico makes plain that it faces a near-term liquidity crisis, has too much debt, limited ability to raise revenues, and a near-decade-long recessionary economy.
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