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On the heels of a dismal economic report, Puerto Rico’s governor has warned that the commonwealth can’t pay its $72 billion public debt, delivering a serious blow to Puerto Rico’s recession-addled economy. But White House spokesman Josh Earnest said the federal government would provide financial expertise and access to existing resources — but not a bailout. “There’s no one in the administration or in D.C. that’s contemplating a federal bailout of Puerto Rico,” Earnest said. “But we do remain committed to working with Puerto Rico and their leaders as they address the serious challenges.” Earnest said the Treasury Department is working with Puerto Rican officials to offer advice, and that an interagency task force would help the island identify federal programs and funds it might be able to tap into. He described that assistance as similar to what the federal government offered Detroit during its crisis. The Obama administration declined to offer Detroit a bailout, and the city declar...

The governor of Puerto Rico has warned that it can't pay its $72 billion public debt, and says it is hoping to defer debt payments and negotiate with creditors, spokesman Jesus Manuel Ortiz said Sunday night. The news, delivered on the eve of a private meeting with legislators on Monday, delivering another jolt to the recession-gripped U.S. territory as well as a world financial system already worrying over Greece's collapsing finances. Gov. Alejandro Garcia Padilla is expected to air a pre-recorded televised address after meeting with legislators, who are still debating a $9.8 billion budget that calls for $674 million in cuts and sets aside $1.5 billion to help pay off the debt. The budget has to be approved by Tuesday. Ortiz confirmed comments by Padilla that appeared in a report in The New York Times published late Sunday, less than a day before Garcia planned to meet with legislators. Heading for default "There is no other option. I would love to h...

Puerto Rico’s junk-rated electric utility, weeks away from owing a $416 million debt payment, is moving closer to a legal showdown as bond insurers consider blocking a move to give it more time to fix its finances. The Puerto Rico Electric Power Authority, called Prepa, has been negotiating with insurers, banks and bondholders since August on ways to revamp its operations and finances, under a pact known as a forbearance agreement. That accord, which keeps the talks out of court, expires Thursday. The power provider said this week that it isn’t generating enough cash to service its $9 billion of obligations. Without the forbearance pact, creditors can sue Prepa, which has breached bond contracts by using reserves for debt payments. Units of Assured Guaranty Ltd., MBIA Inc. and Syncora Guarantee Inc. insure about $2.6 billion of the debt, according to their websites. Some members of that group are weighing ending the accord because the turnaround process is taking too long, according ...

Puerto Rico’s economic activity index was up for the fourth consecutive month in April. BY ROBERT SLAVIN Puerto Rico Economic Activity Index Rises for Fourth Month

A joint venture including two U.S.-based energy companies is proposing a $3.5 billion plan to modernize Puerto Rico’s cash-strapped power utility, which may be pushed to default on its debt. York Capital Management LP, which manages about $26 billion, and energy firms NRG Energy Inc. and ITC Holdings Corp. are offering to build natural-gas generators on the island through their consortium, Puerto Rico New Generation Partners. In return, the junk-rated power authority, called Prepa, would agree to purchase electricity from the group for 30 years, Thomas Atkins, senior director at NRG Energy said in a telephone interview. Prepa has almost $9 billion of obligations and is negotiating with its creditors to potentially reduce that debt load. The new proposal comes as Lisa Donahue, Prepa’s chief restructuring officer, is set to give the utility’s creditors her plan on Monday. Caribbean Business earlier reported the New Generation Partners proposal. Commonwealth officials are encouraged by...

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. Puerto Rico has once again averted disaster, passing a   tax increase   that could salvage a funding deal with some of its creditors and keep the government solvent for another year. But the future still looks bleak. Moody’s downgraded the stricken island’s rating deeper into junk territory last week, arguing that in spite of a likely bond sale backed by a club of hedge funds, Puerto Rico is still   likely to default   eventually. Analysts and investors disagree, however, on just how far the rot will reach. What   Puerto Rican debts   may have to be restructured, and how deep the pain will be, is an extremely complex financial, legal and political calculus that has led big-name investors down differing paths. High quality global journalism requires investment. Please share this article with others using the l...

Legislators on Tuesday narrowly approved an increase in the U.S. territory's sales tax to help generate more revenue and offset a deep fiscal crisis. Gov. Alejandro Garcia Padilla is expected to sign the bill that would increase the tax from 7 percent to 11.5 percent, as well as create a new 4 percent tax on professional services. The sales tax increase would go into effect July 1 and the new tax on Oct. 1, with a transition to a value-added tax by April 1. If approved, it would be the highest sales tax compared with any U.S. state. Officials said the proposed increase could help generate $1.2 billion in revenue as Puerto Rico struggles through its eighth year of recession and faces a $72 billion public debt. Officials previously warned the government could shut down soon if emergency measures were not taken. The approval ends a months-long heated debate where legislators rejected other proposals to generate money including a 14 percent value-added tax as the U.S. territory...