A Puerto Rican flag flies on top of a building in the Old City of San Juan, Puerto Rico, on July 8, 2015. (Christopher Gregory/Bloomberg News)
Puerto Rico agency fails to transfer funds

Puerto Rico’s Public Finance Corp. failed to transfer funds to pay the principal and interest on its bonds, according to a filing Wednesday, highlighting the cash problems the U.S. territory is experiencing as it tries to restructure $72 billion in debt.

The transfer of $93.7 million was for a debt-service payment due Aug. 1 by PFC, which provides financing to the island’s agencies.

U.S. Democratic senators on Wednesday introduced a bill to allow Puerto Rico’s public entities to file for bankruptcy under federal laws. Puerto Rico’s public entities currently cannot make use of Chapter 9 bankruptcy laws as entities in U.S. states can and instead have to renegotiate their debts with creditors.

Sens. Richard Blumenthal (Conn.) and Charles E. Schumer (N.Y.) introduced the bill along with 10 other senators. The bill is identical to one introduced in the House this year by Puerto Rico’s resident commissioner, Rep. Pedro Pierluisi (D). “What we are proposing is that those public corporations and municipalities in Puerto Rico be given the same access to Chapter 9 as any similar entities in the United States,” Blumenthal said. Chapter 9 is the section of the U.S. bankruptcy code that deals with municipal bankruptcies.

Giving Puerto Rico access to Chapter 9 would make it easier for the island’s entities to restructure their debts by providing a framework for an orderly process. Without it, they would have to deal with suits filed by competing parties.

Netflix reported second-quarter financial results on Thursday, July 15, 2015. (Paul Sakuma/AP)

Blumenthal said it was a “quirk in the bankruptcy law” that led to Puerto Rico’s exclusion.

“Chapter 9 would provide Puerto Rico and its 3.5 million U.S. citizens the essential legal framework that would allow us to adjust our debts in order to help generate economic growth and establish long-term fiscal stability,” Puerto Rico Gov. Alejandro García Padilla said in a statement.

Padilla said last month that Puerto Rico was unable to pay its debts and put all of the island’s various types of debt on the table for a possible restructuring, not just the debt of the island’s public corporations.

— Reuters

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