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No Call Yet On GDB’s Interest Payment Due Aug. 1

By on July 28, 2016

PHILADELPHIA — Gov. Alejandro García Padilla said Thursday he was waiting to hear from the Government Development Bank’s (GDB) board before making a call on the interest payment of more than $20 million due Aug. 1 on the bank’s debt.

Government-Development-Bank-GDB featuredHowever, sources told Caribbean Business that the GDB’s board gave this week the go-ahead for making the payment. The governor needs to green-light any interest payment to be made by the bank, as the troubled institution continues to operate under a moratorium order on its debt, along with cash-outflow restrictions amid its strained liquidity levels.

Meanwhile, La Fortaleza already has a short list of potential candidates to take over the troubled institution’s helm, as GDB President & Chairwoman Melba Acosta steps down on July 31.

“We are evaluating various candidates. We have talked to some of them and they are willing [to accept the offer],” García Padilla responded to Caribbean Business’ questions in Philadelphia, where the governor has been participating of the Democratic Party’s convention.

As reported by this newspaper, sources said the GDB’s board of directors would reconvene this week to decide whether to continue meeting interest payments to its creditors—a move aimed at protecting local bondholders, who mostly own this debt, officials have previously said.

The Puerto Rico government would be servicing most of its debt payments due on Aug. 1, or more than $300 million. Holders of Sales Tax Financing Corp. (Cofina by its Spanish acronym) paper and Employee Retirement System (ERS) pension bonds would all receive their payments due next week, sources confirmed to Caribbean Business. Moreover, small interest payments on certain Highways & Transportation (HTA) and P.R. Industrial Development Co. bonds would also be met. Trustees already have funds on hand and will use these to cover the respective payments.

On the default side come Aug. 1, roughly $11 million corresponding to Puerto Rico Infrastructure Financing Authority’s bond anticipation notes would be missed, as well as a $1.5 million interest payment on GO bonds, at least one source told this newspaper.

Moreover, roughly $50 million would add to the more than $90 million that has already been missed to date on Public Financing Corp. (PFC) bonds—which first defaulted a year ago.

While the Puerto Rico Oversight, Management & Economic Stability Act (Promesa) provides that the fiscal control board will decide when and if the government will meet interest payments on its constitutionally guaranteed debt, it is unclear what happens during the time the board is not constituted.

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