Bank Withdrawals Limited
As posted to www.washingtonpost.com on 4/9/16.

SAN JUAN, Puerto Rico — Gov. Alejandro García Padilla ­announced Saturday that he has declared a state of emergency at the Government Development Bank, a moved aimed at ensuring that Puerto Ricans continue to receive essential government services.

The governor said he issued an executive order Friday to halt the erosion of the bank’s dwindling liquidity by allowing withdrawals only to fund necessary costs for health, public safety and education services. The order does not call for a moratorium on the bank’s principal or interest payments. García said the government bank, known as GDB, is in talks with creditors regarding a payment of nearly $423 million, due in May.

The order is the first taken under the Puerto Rico Emergency Moratorium and Financial Rehabilitation Act enacted this past week, which gives the governor emergency powers to deal with the fiscal crisis, including the ability to declare a moratorium on all bond payments.

“The GDB’s financial condition has continued to deteriorate and, absent the measures ordered in this executive order, there is an imminent risk of a drastic decrease in GDB’s liquidity in the immediate term. This, in turn, would jeopardize the provision of essential services by the commonwealth,” the order states.

It notes that the government and creditors are in discussions to address the government’s immediate liquidity challenges and to ensure that its debt service is sustainable over the long-term.

Because restructuring could take time, the order says, “the commonwealth has a duty to take any and all actions reasonable and necessary to protect the health, safety and welfare of its residents by ensuring the continuation of essential services.”

Without debt restructuring, Puerto Rico will be forced to default as it faces nearly $2.5 billion in bond payments from May through July, government officials have said.

The U.S. House Natural Resources Committee this week will consider legislation that will provide bankruptcy powers to Puerto Rico while subjecting it to the authority of a federal oversight board. The U.S. Supreme Court is also reviewing federal court rulings that said a local bankruptcy law enacted by the commonwealth is unconstitutional.

García announced in June that Puerto Rico’s nearly $70 billion debt was not payable. Since then, a deal has been struck with creditors to restructure much of the Puerto Rico Electric Power Authority’s nearly $9 billion debt.

On Thursday, the utility filed a petition before the island’s energy regulator for a new securitization charge, which would pay for the restructured debt following a planned bond exchange. Officials estimate that the charge, which will be revised quarterly, will initially be $11.98 a month for residential customers and .03 cents per kilowatt hour for nonresidential customers, according to the filing.