Puerto Rico lawmakers approve moratorium on loan repayments
SAN JUAN - Early Wednesday morning, Puerto Rico's House of Representatives approved a bill imposing a moratorium on servicing the US territory’s massive $70 billion debt.
The Senate approved the bill in the early hours of Tuesday morning, and the House passed it some 24 hours later after a lengthy debate.
It now goes to Governor Alejandro Garcia Padilla, who is expected to sign it.
According to the governor, the bill to stop the loan payments is the best way to guarantee continued services for the 3.5 million residents of the US Caribbean territory, in the absence of a federal bailout.
The US Congress so far has not granted the island the right to bankruptcy protection, as the White House and Puerto Rico governor have sought to do, and the bill is seen as adding pressure on Congress for a restructuring of the island’s debt burden.
Garcia Padilla said that the government cannot pay creditors when it needs to fund public sector salaries, health and education budgets, which if it neglects could unleash a "humanitarian crisis."
Meanwhile, US Virgin Islands Governor Kenneth Mapp has expressed his strong concern to Congressional leaders in relation to proposed changes in the language in the Puerto Rico debt restructuring bill released last week by the House Natural Resources Committee.
The legislation, if enacted, is likely to adversely affect the ability of the USVI to access capital markets and raise the territory’s cost of borrowing.
The governor urged members of Congress to take more time to consider the serious ramifications of the proposed substitute language on the US Virgin Islands.
While Puerto Rico requires assistance in restructuring its debt, the bill includes a provision to make it easier for fiscal restrictions via Oversight Board to be imposed on other US territories.
Among the serious concerns raised by the provision is that these restrictions could govern how debts to bondholders and others will be paid – increasing the cost of raising capital.
“I believe it is unfair and wrong to demand that the other territories agree to the authorization for an Oversight Board with extraordinary powers -- even one that would not be triggered unless requested by local resolution -- without consultation with the territories affected and without considering or understanding the impact of enacting such a provision on our ability to access the capital markets and the cost to our treasuries of accessing such critical capital,” the governor stated in his message to Congress.
Mapp said that Congress was moving to act quickly to provide relief to Puerto Rico prior to May 1 when some $400 million of Puerto Rico’s debt becomes due. However, he is suggesting that a stay be placed on any litigation or forced debt collection activity to give Congress the necessary time to consider the broader ramifications of the House bill, particularly its potential impact on the small territories.
The governor sent letters on Tuesday afternoon to House Speaker Paul Ryan, Democratic Leader Nancy Pelosi, Natural Resources Chairman Robert Bishop and several other ranking members of Congress.
He also reached out to governors in the other territories to ask that they join with him to ensure that their voices were heard before the House acts on what Mapp described as "momentous legislation"