Puerto Rico could be completely illiquid by November, pushing it closer to defaulting on major debt payments, the territory's top officials said Thursday.
Without support from the U.S. federal government, "Puerto Rico may have to choose between paying its creditors and providing essential services to the island's 3.5 million American citizens," the Governor of Puerto Rico, Alejandro Garcia Padilla, told lawmakers at a Senate hearing on Thursday.
Details of just how severe Puerto Rico's short-term liquidity crisis has become were outlined in the Governor's written statement.
"Based on current information the Commonwealth will have a negative cash balance of $29.8 million in November 2015," and Puerto Rico's "illiquidity will only grow worse when a $355 million debt service payment on bonds of the Government Development Bank (GDB) comes due on December 1."
Based on current information, "the GDB, which faces its own liquidity crisis, is not expected to be able to make the payment," to its bondholders, the statement added.
Antonio Weiss, the Counselor to the U.S. Treasury Secretary, outlined the key details of the Obama administration's proposed policy changes to help aid the cash-strapped island.
The plan, unveiled late Wednesday, includes an unprecedented "Super Chapter 9" proposal to create a restructuring framework that is reserved exclusively for U.S. territories. The proposal would give Puerto Rico access to Chapter 9 - a chapter of the U.S. Bankruptcy Code that allows local and state governments to restructure their debt - to restructure not just its municipalities' debts, but also allow the Commonwealth as a whole to restructure its debt under U.S. bankruptcy laws.