Opinions vary on how to fix Puerto Rico’s $70 billion debt crisis, but analysts, investors, credit-rating companies and even Governor Alejandro Garcia Padilla agree on one thing: the commonwealth will default in 2016. The question is, will it happen as soon as Jan. 1?
Puerto Rico and its agencies owe nearly $1 billion in interest payments Friday, including $357 million on general-obligation debt that the Caribbean island’s constitution says must be paid before everything else. Officials have until late Monday night because of the New Year’s holiday. One agency that’s unlikely to default: The Puerto Rico Electric Power Authority, which plans to make good on its Jan. 1 payment as part of a debt-restructuring deal reached last week.
The governor, who won’t seek re-election in 2016, said last week that making all the debt payments will be “almost impossible.” He has stressed repeatedly that if forced to choose between paying creditors and keeping essential services running, he will choose the latter.
Garcia Padilla this month started redirecting revenue used to repay certain agency debt to the central government’s coffers. As a result, the Infrastructure Financing Authority, the Highways & Transportation Authority and the Convention Center District Authority said they’ll use reserves to help pay their investors on Jan. 1.