Puerto Rico to pay $1.4 mln in general obligation debt

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By Nick Brown

<span class="articleLocation”>Puerto Rico Governor Ricardo Rossello said on
Thursday that the U.S. territory would make a $1.4 million
interest payment on constitutionally-backed bonds by drawing on
so-called “clawback” money deposited at Banco Popular.

The payment to general obligation bondholders, which was due
on Feb. 1 and initially missed, represents a departure from a
series of defaults triggered last year by ex-Governor Alejandro
Garcia Padilla.

“We demonstrate today that our administration’s vision is
very much different from the past, which was defaulting — ours
is compliance,” Rossello said at an event in San Juan with
private sector leaders.

Rossello, who was sworn in on Jan. 2, said he would fund the
payment by drawing on a $146 million account at Banco Popular,
funded with money that had been earmarked for other debt
payments, but was redirected or “clawed back” by Garcia Padilla
last year as the island grappled with a fiscal crisis.

Rossello would transfer the money in the Banco Popular
account into a new trust, though he did not indicate whether
future general obligation (G.O.) payments would be made.

Puerto Rico has $70 billion in total debt, a 45 percent
poverty rate, a shrinking population, and unemployment more than
twice the U.S. average.

Garcia Padilla did not seek reelection. Rossello campaigned
as more conciliatory to Wall Street, vowing to cut government
spending and try to pay as much of Puerto Rico’s debt as
possible.

Just six weeks into his term, however, Rossello’s
credibility with bondholders appeared to be eroding, with
investors worrying privately that he might double down on his
predecessor’s populist approach.

Rossello signed a law last month that allowed him to set
aside funds to pay for government services ahead of debt
payments, and to define which services were “essential.” The law
also did not repeal Garcia Padilla’s moratorium on debt
payments, though it gave Rossello the ability to roll back the
moratorium in the future.

The payment announced on Thursday “proves a significant
change in public policy under this administration,” Rossello
said.



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