Puerto Rico said it made all principal and interest bond payments due Tuesday, averting a default on directly guaranteed debt and allowing the commonwealth to continue talks with creditors to reduce its $70 billion debt burden.
Governor Alejandro Garcia Padilla signed an executive order to permit the redirection of revenue budgeted for the debt service of some public corporations to pay for government expenses and debt issued or guaranteed by the commonwealth, according to a Government Development Bank statement. The GDB, which lends to the commonwealth and its agencies, has $354 million in principal and interest payments due Tuesday.
Garcia Padilla announced the so-called clawback provision during a Senate hearing Tuesday on the commonwealth’s finances and request to access bankruptcy. The governor has said the island is running out of cash and will focus on providing essential services while in negotiations with creditors to accept losses on their holdings.
Of the $354 million in payments due, $267 million of the bonds are guaranteed by Puerto Rico. A missed payment on those securities would have been the first default on the commonwealth’s direct debt. A Puerto Rico agency skipped a debt payment in August on bonds repaid through legislative appropriation.