Puerto Rico does not have enough cash flow to meet its upcoming Public Finance Corp. payment of $169.60 million due on Aug. 1, the Governor's Chief of Staff, Victor Suarez, said Monday. (Tweet This)
Suarez added that the commonwealth's government is considering raising between $400 and $500 million through Puerto Rico's gas tax as a repayment source.
He also said the Puerto Rico Infrastructure Financing Authority (PRIFA) is abandoning its original plan of raising nearl $3 billion to refinance a $2.2 billion loan its Government Development Bank made to the Highways and Transportation Authority (HTA).
"It is not being contemplated as a $3 billion transaction, there is no market for it," said Suarez. "We are trying to achieve a smaller transaction, with reasonable terms, of some $400 to $500 million."
The news came nearly two weeks after the PFC failed to transfer funds to pay the principal and interest on its bonds.
"There has to be the payment allocation by the Legislature (in the budget) and the cash flow," Suarez added. "If one of the two things is not there, we can't do (the PFC payment). Right now, both are not there."
"I think this puts other bond payments in jeopardy," John Miller, co-head of fixed income for Nuveen Assset Management, told Reuters on July 16. "All classes of bonds, as the government has said, are in greater jeopardy of non-payment in the near term."
Nevertheless, Suarez also said the Island will do everything possible to ensure the debt, which is owed by the Government Development Bank, Puerto Rico's financing arm, is paid.
Puerto Rico's ongoing debt problems have been under a microscope since Gov. Alejandro Garcia Padilla said the Island's debts were simply not payable in late June.
Correction: This story has been updated to reflect the amount due on Aug. 1 is $169.60 million.