Puerto Rico Pleads for U.S. Aid as Senate Dashes Bankruptcy Pushby and
Governor Garcia Padilla says spending bill may be best chance
Moments after comments, Senate rejected bankruptcy bill effort
Puerto Rico Governor Alejandro Garcia Padilla pleaded with Congress to help his government emerge from a deepening fiscal crisis, saying the federal spending bill may be the best chance for the island to secure aid before bond payments come due next month.
Just moments after the governor began speaking with reporters in Washington Wednesday, Democrats in the Senate failed in an effort to unanimously push through a bill that would allow some of Puerto Rico’s agencies to file for municipal bankruptcy, one of the island’s top priorities. The bill has stalled for lack of support among Republicans who control Congress.
Garcia Padilla said the most likely way for the island to secure aid this month would be by attaching provisions to the spending bill that Congress must pass to keep the government running.
“It looks like the most likely way for Congress to act prior to January,” Garcia Padilla told reporters. “For American taxpayers, if Congress does not act now, this will not be expensive -- it will be very expensive because this will turn into a humanitarian crisis.”
The federal government has so far failed to intervene as Puerto Rico veers closer toward a major default on its bonds, which are held in the portfolios of many American investors. The territory made interest payments due on government-guaranteed debt this month as it diverted funds earmarked for other obligations. Garcia Padilla has said the island is running out of such maneuvers as $957 million of bond payments are due Jan. 1.
“Puerto Rico is out of cash,” he told reporters.
The Obama administration has pushed for Congress to give Puerto Rico broad powers to restructure its debts and increase health-care funding.
Republicans, including Senator Orrin Hatch of Utah, have said allowing Puerto Rico agencies to file for bankruptcy, as U.S. cities can, would alter the existing contracts between the island and bondholders, echoing the arguments of investors such as Franklin Advisers Inc. and OppenheimerFunds Inc. Hatch said Wednesday that he will file a measure related to Puerto Rico this afternoon, while declining to mention specifics.
Without the ability to have its debts written down in U.S. court, Puerto Rico has been dependent on voluntary negotiations with creditors.
“Puerto Rico urgently needs a legal framework to restructure all its liabilities,” the governor said. “We are not asking for a bailout. We are asking for the tools to do the job.”
Puerto Rico general obligations with an 8 percent coupon and maturing July 2035 traded Wednesday at an average price of 75 cents on the dollar, data compiled by Bloomberg show. The average yield was 11.2 percent.