Puerto Rico ‘Very Unlikely’ to Avoid Jan.1 Default: Governor

December 23, 2015, 12:35 AM UTC
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Alejandro Garcia Padilla, governor of Puerto Rico, center, speaks during a meeting with Senator Carmelo Rios, second from left, at the Governor's Mansion, known as La Fortaleza, in San Juan, Puerto Rico, on Tuesday, July 7, 2015. Garcia Padilla said in a televised speech June 29 that Puerto Rico will seek to delay payments on the islands debt for a number of years. Photographer: Christopher Gregory/Bloomberg via Getty Images
Photograph by Christopher Gregory — Bloomberg via Getty Images

Dec 22 (Reuters) – Puerto Rico’s governor Alejandro Garcia Padilla said on Tuesday it is “very, very unlikely” there will be no default on debt due Jan. 1 and that the U.S. territory was evaluating which bonds are to be paid.

“Making a total payment will be (very unlikely),” Garcia Padilla told reporters at an event in San Juan. “If a partial payment is to be done, which bonds should be paid? It is an evaluation that we are doing.”

Puerto Rico first defaulted on its debt in August and has warned that more defaults are coming. It has an upcoming debt payment of around $1 billion due Jan. 1.

“It is very, very unlikely there is no default,” Garcia Padilla said. “Very unlikely. In full or part.”

Puerto Rico officials have given clear warnings of defaults. Garcia Padilla said earlier in December that the island “will default in January or in May,” and Melba Acosta, president of the island’s Government Development Bank (GDB) was quoted in local media last Friday saying the island is expected to default on a Jan. 1 payment on its Infrastructure Finance Authority (PRIFA) bonds.

Garcia Padilla on Dec. 1 granted the U.S. territory power to take revenues from public agencies such as the highways agency HTA, PRIFA and its convention center district authority via “clawbacks”.

While the HTA and convention center have said in filings that they expect interest due Jan. 1 will be paid in full from funds in deposit, PRIFA has only said that funds on deposit would be applied to the Jan. 1 payment.

“There are obligations that already have funds… Those that already have enough funds will be paid,” Garcia Padilla said on Tuesday.

Garcia Padilla said he was “trying to come up with the largest quantity possible to pay the most possible.”

He added that he has an obligation to make payments if Puerto Rico has money – otherwise the island would face litigation from creditors.

“If I have the money, and I don’t use it to pay the government’s obligations, then we lose the case in court in two seconds,” Garcia Padilla said. “Because if the money is there, I have to use it to pay.”

(Reporting by a contributor in San Juan; writing by Megan Davies; Editing by James Dalgleish and Diane Craft)

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