Puerto Rico Gov. Alejandro Garcia Padilla said the U.S.
commonwealth can't pay its debts and called for a negotiated
agreement with bondholders to delay payment for "a number of years"
to help restore the island to prosperity.
In a televised speech Monday, the governor said Puerto Rico
officials will develop a comprehensive debt-restructuring plan by
the end of August. Without such a plan, "the option is unplanned
and unilateral default of our obligations, with all the negative
consequences that this implies for each and every one of us," he
said.
"Let me be clear: This is not about politics," Mr. Padilla said.
"This is about math."
Prices of some Puerto Rico bonds sold in 2014 touched record
lows of around 68 cents on the dollar Monday after the commonwealth
released a report by former International Monetary Fund officials
that called for a restructuring of Puerto Rico's $72 billion in
debt, which is more per capita than any U.S. state.
"We cannot allow the heavy weight of the debt to bring us to our
knees," Mr. Padilla said. "We cannot allow the situation to force
us to choose between paying our creditors and paying our policemen,
teachers and nurses."
Mr. Padilla promoted various measures to overhaul government
operations, including additional spending cuts and establishing a
five-year fiscal plan.
He also called for lawmakers in Washington to allow Puerto
Rico's municipal entities access to the protections afforded under
chapter 9 of the bankruptcy code. Puerto Rico, like U.S. states,
can't file for chapter 9 bankruptcy protection, which is an option
for cities and towns and any subdivision, agency or
"instrumentality" of a state.
But Puerto Rico doesn't qualify as a state for the purposes of
chapter 9, and its heavily indebted authorities, such as the
electric utility Prepa, can't file for bankruptcy protection. Much
of the island's public-sector debt is actually owed by these
entities.
"We are not restructuring the debt in a vacuum," Mr. Padilla
said. "All the measures we have taken in the last two years reflect
our willingness to pay and, had we not taken them, we would not be
in a position today to request restructuring. We have done all that
was within our power, but, as the report makes clear, the next step
must be to ensure more favorable terms for the repayment of our
debt."
Write to Aaron Kuriloff at aaron.kuriloff@wsj.com
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