Cash Shortage Seen in Puerto Rico in 3 Months

Three months.
That is how long the Puerto Rico government has before it could run out of money, according to the island’s top finance officials.
The warning came in an unusual letter to the commonwealth’s governor and the heads of the House and Senate from the Government Development Bank, which oversees all of Puerto Rico’s debt deals.
The letter, which was sent this week, was meant to underscore the need for Puerto Rico lawmakers to act quickly to address the island’s fiscal problems, officials said.
Lawmakers have been squabbling over a plan to overhaul the commonwealth’s tax system to generate sorely needed revenue. That debate has held up Puerto Rico’s plan to sell as much as $2.95 billion in bonds — a critical source of liquidity — because potential investors want to see the commonwealth’s long-term fiscal plan before agreeing to lend more money.
Without that long-term bond deal, and another shorter-term financing that Puerto Rico needs to complete this summer, the government’s liquidity could be depleted by July, David H. Chafey Jr., the chairman of the development bank, said in an interview.
“For us to be able to borrow from traditional investors or hedge fund investors, they will say show me your plan and show your budget,” Mr. Chafey said.
Puerto Rico, which is struggling with more than $70 billion in debt and a sluggish economy, has increasingly relied on hedge funds to buy its debt.
Even if the investors were willing to lend to Puerto Rico without a long-term fiscal plan in place, Mr. Chafey said, they could demand prohibitively high rates and onerous terms.




Puerto Rico is struggling with more than $70 billion in debt and a sluggish economy. Dennis Rivera for The New York Times
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Cash Shortage Seen in Puerto Rico in 3 Months

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