Puerto Rico Lacks Cash for Aug. Bond Payment, Official Says

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Puerto Rico currently lacks the funds needed to make a payment due next month on bonds sold by its Public Finance Corp., a government official said.

Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla, told reporters Monday in San Juan that whether the payment is made will depend on if the commonwealth has cash available. He didn’t say whether the island will be able to do so. The commonwealth is also working on a short-term borrowing backed by oil-tax revenue, Suarez said.

The payment will hinge on “the liquidity the government has to attend to each of its obligations,” he said. “The priority will always be to attend to the essential services to citizens, such as security, health care and education.”

Puerto Rico faces $58 million of interest and principal due Aug. 1 on the Public Finance Corp. bonds, according to Moody’s Investors Service. It may miss the payment because the legislature has failed to allocate the funds, which would be the first default by the commonwealth as it moves toward restructuring $72 billion of debt.

Puerto Rico’s budget director, Luis Cruz, said in an interview published by El Vocero Monday, that the government has decided not to make the payment.

To boost liquidity, the commonwealth had been working to sell $2.9 billion of bonds backed by oil-tax revenue through its Infrastructure Financing Authority, called Prifa. Instead, officials are now looking to borrow as much as $500 million in short-term debt backed by oil taxes, Suarez said.

“The Prifa transaction will take a little bit longer and will be smaller than initially planned, in the neighborhood of $400 million to $500 million,” Suarez said.

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