Associated Press, 18 May 2016
SAN JUAN, Puerto Rico – Puerto Rico’s governor on Wednesday again used a state of emergency decree to protect one of the island’s struggling public agencies from lawsuits and preserve dwindling liquidity as U.S. Congress stalls on a bill to restructure the island’s $70 billion public debt.
The order allows Puerto Rico’s Highways & Transportation Authority to suspend the transfer of toll revenues to bondholders and imposes a stay on legal claims, Gov. Alejandro Garcia Padilla said. That will allow the government to pay contractors and avoids paralyzing safety and improvement projects, he said.
The agency, which runs and maintains the U.S. territory’s highways and bridges, holds about $4 billion in debt and faces a $233 million bond payment in July that it expects to make.
Garcia said the order does not impose a moratorium on the agency’s debt payments, though government agencies have defaulted on an increasing number of multimillion-dollar bond payments.
An analysis released this week by the Center for the New Economy, a Puerto Rico-based think tank, states the island’s economy has shrunk by 14 percent since 2006, while its population declined by 9 percent and total employment dropped by nearly 20 percent.
Garcia said the transportation agency needs nearly $25 million a month to operate and more than $150 million to pay contractors.
Last month, the agency agreed to take a cut in revenue collections from 50 percent to 25 percent to reach a $115 million deal with a Spanish-based company that manages the island’s toll roads.
That announcement prompted a lawsuit by bond insurer Ambac Financial Group, which seeks to block the deal due to concern it could undermine other claimants. It asked for the appointment of an interim receiver. An Ambac spokesman said the company did not have immediate comment on Garcia’s actions.
Other Puerto Rico agencies are struggling to remain afloat as well.
The Government Development Bank, which issues loans and oversees Puerto Rico’s debt transactions, was placed under a state of emergency in early April. The order only allows withdrawals to fund necessary costs for health, public safety and education.
Meanwhile, Garcia is pushing Congress to approve a debt-restructuring mechanism because there are no local or federal laws that allow Puerto Rico agencies or municipalities to declare bankruptcy.
U.S. House Republicans have delayed introduction of a bill that would create a control board to oversee some court-ordered debt restructurings. House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell have been involved in the negotiations, as is the White House. The aim is to write a bill that could pass both the House and the Senate before Puerto Rico defaults on a $2 billion debt payment due July 1.