Puerto Rico said one of its agencies didn’t provide funds needed to cover debt payments as the cash-strapped commonwealth reels from an escalating fiscal crisis, Bloomberg News reported yesterday. The Public Finance Corp. didn’t direct money due yesterday to a bond trustee because the legislature failed to appropriate the funds when it passed the budget last month, Puerto Rico’s Government Development Bank said in a bond filing. “In accordance with the terms of these bonds, the transfer was not made due to the non-appropriation of funds,” Melba Acosta, president of the GDB, said in an e-mailed statement. It’s unclear whether Puerto Rico will still make a $36.3 million payment on bonds maturing Aug. 1 that was to be covered with the money. If it doesn’t pay investors next month, that would mark the first time Puerto Rico has defaulted on a debt payment and would come as it’s seeking to negotiate with creditors to restructure $72 billion of obligations. Read more.
In related news, U.S. Democratic senators yesterday introduced a bill to allow Puerto Rico's public entities to file for bankruptcy under federal laws as the U.S. territory starts negotiations with creditors to restructure $72 billion in debt, Reuters reported yesterday. As a U.S. territory, Puerto Rico cannot place its public entities under chapter 9 protection. Sens. Richard Blumenthal (D-Conn.) and Charles Schumer (D-N.Y.) introduced the bill along with 10 other senators. The bill is identical to one introduced in the House earlier this year by Puerto Rico's resident commissioner Pedro Pierluisi. Read more.
