U.S. Senator Blumenthal Says Puerto Rico Avoids Bond Default

  • Governor doesn't comment directly on Dec. 1 debt repayment
  • Commonwealth to claw back revenue pledged to other bonds

U.S. Senator Richard Blumenthal said during a Congressional hearing Tuesday that Puerto Rico has averted defaulting on its bonds. Governor Alejandro Garcia Padilla wasn’t so clear.

Blumenthal, a Democrat, spoke at the beginning of a hearing on Puerto Rico, which faces a debt payment Tuesday. He didn’t provide details. Garcia Padilla didn’t say during his testimony before the Senate Judiciary Committee in Washington whether the $354 million in payments due Tuesday would be made.

“The Government Development Bank will make an announcement in a few minutes or maybe hours about the payment, ” Garcia Padilla said to reporters after his testimony. “Even though we are doing our best to make this Dec. 1 payment, we are out of cash and now we are into claw back.”

Puerto Rico will begin taking revenue that currently repays certain bonds and use that money for other government expenses, called a ”clawback,” Garcia Padilla told the committee.

“Starting today, the commonwealth of Puerto Rico will have to claw back revenues pledged to certain bond issues in order to maintain essential public services,” Garcia Padilla said before the committee.“We have taken this difficult step in the hope that Congress will act soon. But let us be clear. We have no cash left. The emergency measures we have taken to avoid a default and maintain essential services are unsustainable.”

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