Puerto Rico's Governor Alejandro Garcia Padilla
addresses the audience at the capitol building in San Juan, in this February
29, 2016 file photo. REUTERS/ALVIN BAEZ/FILES
Puerto Rico's Governor Alejandro Garcia Padilla
declared an emergency at the island's Government Development Bank on Saturday
as the GDB struggled to avoid default on a crucial May 1 debt payment.
The announcement followed his signing of
a law this week authorizing him to take steps to avoid receivership at the GDB,
the U.S. territory's primary fiscal agent, and prevent a run on the bank.
The emergency declaration
"establishes reasonable and necessary procedures to preserve GDB's
liquidity," Garcia Padilla said in a statement on Saturday in
Spanish.
However, he declined to exercise his
authority to declare a moratorium on GDB's $422 million May 1 debt payment,
citing continuing restructuring talks between GDB and its creditors.
"The Executive Order
establishes reasonable and necessary procedures to preserve liquidity at GDB
and allow it to continue its operations for the benefit of the health, safety
and welfare of the people," he said in the statement.
Puerto Rico faces $70 billion in total
debt, a 45 percent poverty rate and a shrinking population.
Garcia Padilla has said the GDB cannot
afford the looming payment. While the island has defaulted on small debt
payments in the past, a default at GDB would be the most serious yet.
Local efforts by GDB and other Puerto
Rican debt issuers to reach a debt restructuring parallel plans in the U.S.
Congress to draft legislation aimed at solving the island's economic crisis,
possibly by allowing it to restructure debt and putting its finances under
federal oversight.
A new draft of that legislation is expected next week
from the House Natural Resources Committee.
Some Puerto Rico bondholders have
criticized Garcia Padilla's emergency legislation, particularly the authority
to issue a moratorium on any debt the governor deems necessary.
Daniel Hanson, an analyst at Height Securities, said
in a note this week the law could draw lawsuits from creditors.
Moody's said in a note on Friday that it
would define a nonpayment at GDB as a default "regardless of [a debt]
moratorium law's provisions."
(Reporting By Nick Brown in San Juan; Editing by
Daniel Bases and Tom Heneghan)
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