Puerto Rico and creditors agree more talks despite default

Governor Alejandro Garcia Padilla speaks to press at his mansion in Puerto Rico - 14 November 2013 Image copyright Getty Images
Image caption Mr Garcia Padilla said creditors must "share the sacrifices" imposed on Puerto Rico's residents

Puerto Rico has defaulted on a $422m (£289m) debt payment due on Monday, but won breathing space from some major creditors for further talks.

The US territory's governor warned on Sunday the island's financial crisis meant it could not meet the deadline. Puerto Rico has $70bn of debts.

With further, larger loan repayments due in coming months Alejandro Garcia Padilla asked for more time for talks.

Creditors have agreed to 30 days of talks and hold off from legal action.

Mr Garcia Padilla said Puerto Rico's Government Development Bank (GDB) and major creditors had agreed a framework for restructuring some of the debt. He described it as a "vital first step".

However, the territory owes another $1.9bn in July. Any restructuring must be approved by the US Congress, which has been accused of dragging its feet to help Puerto Rico.

As a US territory, Puerto Rico cannot file for bankruptcy protection. It has been pleading for Washington to offer it a lifeline.

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Mr Garcia Padilla, who inherited the crisis when he took office in January 2013, blamed lobbying by "vulture" hedge funds and what he called "racist" attitudes towards Puerto Rico. "Our worst enemy at the moment is politics," he said.


White House spokesman Josh Earnest said on Monday that he hoped the latest developments would push Congress to act.

The creditors who have agreed a 30-day extension of talks hold about $935m of GDB's $4bn in bonds.

The creditors call themselves the Ad Hoc Group.

They are thought to have been due about $120m of the total $422m that should have been repaid to creditors on Monday. Puerto Rico could still face legal action from creditors who are not part of Ad Hoc.

In a televised speech on Sunday evening, Mr Garcia Padilla said the decision to default had been "painful" and that legal action would make a desperate situation worse.

The Ad Hoc Group includes hedge funds Avenue Capital Management, Brigade Capital Management, Claren Road Asset Management, Fir Tree Partners, Fore Research & Management and Solus Alternative Asset Management.

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