Puerto Rico Bond Payments Depend on Cash Levels, Official Says

Puerto Rico will make debt payments as long as it has enough cash to do so, a government official said.

Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla, told reporters Monday in San Juan that the island “hasn’t said it won’t” make payments due on general-obligation bonds in January. He said the commonwealth is working to boost its cash on hand and borrowed $400 million from some government funds last week.

The comments come a week after Puerto Rico defaulted for the first time, when it failed to make a full payment on bonds sold by its Public Finance Corp. Puerto Rico’s securities have tumbled in price after Garcia Padilla said the U.S. territory can’t afford its $72 billion of debt because of the teetering economy.

“The government will be carefully evaluating all the obligations that it has in terms of the legal developments there could be and in terms of the effect they could have on the government’s essential operations,” Suarez said. “We’ve said this publicly, we’ve said this to the creditors and that’s what we’re going to continue to say.”

Puerto Rico’s Public Finance Corp. paid only $628,000 of a $58 million debt-service bill last month because the island’s legislature failed to appropriate the money as it wrestled with a budget shortfall. Other commonwealth agencies may follow it in defaulting, according to Standard & Poor’s.

Garcia Padilla said in June that the commonwealth was unable to repay all of its obligations, and officials have said they aim to draft a restructuring plan by Sept. 1.

Puerto Rico’s debt crisis has been building for years as the commonwealth borrowed to cover budget gaps. The administration has delayed tax rebates and payments to suppliers to preserve money for health and safety programs for its residents.