Puerto Rico Governor Ricardo Rossello said on Thursday that the U.S. territory would make a $1.4 million interest payment on constitutionally-backed bonds by drawing on so-called "clawback" money deposited at Banco Popular.
The payment to general obligation bondholders, which was due on Feb. 1 and initially missed, represents a departure from a series of defaults triggered last year by ex-Governor Alejandro Garcia Padilla.
"We demonstrate today that our administration’s vision is very much different from the past, which was defaulting -- ours is compliance," Rossello said at an event in San Juan with private sector leaders.
Rossello, who was sworn in on Jan. 2, said he would fund the payment by drawing on a $146 million account at Banco Popular, funded with money that had been earmarked for other debt payments, but was redirected or "clawed back" by Garcia Padilla last year as the island grappled with a fiscal crisis.
Rossello would transfer the money in the Banco Popular account into a new trust, though he did not indicate whether future general obligation (G.O.) payments would be made.
Puerto Rico has $70 billion in total debt, a 45 percent poverty rate, a shrinking population, and unemployment more than twice the U.S. average.
Garcia Padilla did not seek reelection. Rossello campaigned as more conciliatory to Wall Street, vowing to cut government spending and try to pay as much of Puerto Rico's debt as possible.
Just six weeks into his term, however, Rossello's credibility with bondholders appeared to be eroding, with investors worrying privately that he might double down on his predecessor's populist approach.
Rossello signed a law last month that allowed him to set aside funds to pay for government services ahead of debt payments, and to define which services were "essential." The law also did not repeal Garcia Padilla's moratorium on debt payments, though it gave Rossello the ability to roll back the moratorium in the future.
The payment announced on Thursday "proves a significant change in public policy under this administration," Rossello said.
(Reporting by Nick Brown and a contributor in San Juan, editing by G Crosse and Diane Craft)