SAN JUAN – The government of Puerto Rico has failed to make $37.3 million in debt repayments, a selective default dictated by lack of liquidity, Public Affairs Secretary Jesus Manuel Ortiz told EFE on Tuesday.
The island’s government signaled last week that it would not make the payments, which were due by midnight Monday.
The defaulted debt corresponds to $35.9 million in bonds issued by the Puerto Rico Infrastructure Finance Authority and $1.4 million in Public Finance Corp. bonds.
Rating agency Standard & Poor’s said Monday that if Puerto Rico didn’t pay the $37.3 million by midnight, the bonds would be declared in default.
S&P said that Puerto Rico’s selective default on a “relatively small” amount reflected a “deliberate choice.”
The bonds in question offer little legal protection to their holders.
The U.S. commonwealth, however, plans to make full payment of around $335 million on its constitutionally guaranteed general obligation, or GO, bonds, coming up with around half of the necessary cash by shifting around money that had originally been intended to pay holders of other bonds.
Gov. Alejandro Garcia Padilla said his administration had to prioritize among competing obligations and that incurring in a $37.3 million default allowed the government to pay public employees and issue income tax refunds.
Financial experts said that lawsuits from creditors can be expected in coming weeks.
Puerto Rico’s financial liabilities total nearly $73 billion, a sum Garcia Padilla has declared “unpayable.”
The governor’s administration is appealing to the U.S. Congress to extend Chapter 9 bankruptcy protections to Puerto Rico.