Puerto Rico Says Services Come Before Agency Debt Payment

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Puerto Rico’s budget director ratcheted up the risk of a default on some agency securities, saying cash from the commonwealth’s operating budget won’t be redirected to make debt payments due next month.

The comments from Luis Cruz, director of the Office of Management and Budget, come as Standard & Poor’s slashed its rating on the Public Finance Corp.’s bonds to CC from CCC-, calling an Aug. 1 default on the securities a “virtual certainty.”

Puerto Rico said last week the agency failed to transfer $36.3 million to a trustee to cover the Aug. 1 debt payment because the legislature didn’t appropriate the funds. Governor Alejandro Garcia Padilla last month directed island officials to create a debt-restructuring plan by Aug. 30, saying the commonwealth can’t sustain its $72 billion debt burden.

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