sábado, 30 de abril de 2016
GOV: PUERTO RICO BRACES FOR LAWSUITS AS MAJOR DEFAULT LOOMS.
GOV:
PUERTO RICO BRACES FOR LAWSUITS AS MAJOR DEFAULT LOOMS.
USA, April 30, 2016. Puerto Rico’s
governor said Friday that the U.S. territory is bracing for multiple lawsuits
as a major default looms over a $470 million bond payment. Gov. Alejandro
Garcia Padilla said he would like judges to take Puerto Rico’s economic and
humanitarian crisis into account when ruling on the anticipated lawsuits.
“I hope the judges use their
conscience,” he told reporters. Garcia said he has warned since last year that
the government cannot afford to make the bond payment due Sunday, which would
be the island’s largest default to date. More than $422 million of that is for
bonds issued by Puerto Rico’s Government Development Bank, which is struggling
as funds dwindle. The bank issues loans and oversees the island’s debt
transactions.
“May 1 is big because it may mean the
end of the GDB,” said Vicente Feliciano, an economist and business consultant
in San Juan.
Under the bank’s current state of
emergency, only withdrawals to fund necessary health, public safety and
education services are allowed. The bank also faces a suit filed earlier this
month by hedge funds seeking to stop it from paying certain creditors and
forgiving debt.
A default would mean that Puerto Rico’s
access to capital markets would shut down, which would terminate the $1.2
billion to $1.4 billion in tax revenue anticipation notes the government issues
yearly, economist Gustavo Velez said.
This in turn means the government would
struggle to pay workers and suppliers and submit a new budget due soon.
“This default would formalize the
gravity of the fiscal crisis that Puerto Rico faces,” Velez said.
Friday evening, officials announced a
deal to pay down a small percentage of the overall debt. The Government Development
Bank said it reached agreement with a group of credit unions to exchange some
$33 million in notes due Monday for ones maturing May 2017.
The anticipated default comes as Puerto
Rico sputters through a decade-long economic slump and faces a $70 billion
public debt load that Garcia has said is unpayable and needs restructuring.
U.S. legislators have delayed approving
a bill that would provide Puerto Rico with a debt-restructuring mechanism and
implement a fiscal control board. As action on that bill lagged, Garcia signed
a bill into law that allows him to declare a debt moratorium if needed.
Many expect him to do just that Monday
if no deal is reached with bondholders.
But Feliciano warned that a moratorium
will not fix the crisis. “We need resolution,” he said. “The longer this takes,
the worse for the economy. There’s a shrinking tax base and there is less in
the end to spread around.” Feliciano and other economists do not anticipate any
immediate consequences besides lawsuits after the expected default. But if a
court orders the government to pay creditors, it could force cuts to public
services. “There’s no way around that,” Feliciano said. “That’s a real
possibility.”
Creditors have accused the government of
exaggerating the crisis to avoid upcoming payments such as $780 million due
July 1 that includes general obligation bonds, which are guaranteed by the
constitution. Economists warn that a default on that payment would bring much
bigger consequences for the U.S. territory. Credit : Associated Press (AP). Published On: Sat, Apr
30th, 2016, By New
Delhi Times Bureau. Courtesy Published
by VAZCORP CORP.