Debt puts Puerto Rico public employees' Christmas bonus at risk

Reuters News
Posted: Dec 02, 2015 4:44 PM

SAN JUAN (Reuters) - Puerto Rico's public employees might have to do their part to help the Commonwealth make ends meet and miss an annual Christmas bonus, due to the island's deteriorating finances and debt crisis.

A local law provides for an annual Christmas bonus, but on Wednesday Public Affairs Secretary Jesus Manuel Ortiz said the payment due on Friday will not be made, contrary to prior announcements by government officials.

"We will not pay the (Christmas) bonuses on Dec. 4. The government has until Dec. 20 to make that payment, according to the law. Therefore, there is still time to continue with the measures being taken and see if we are in condition to make the payment," Ortiz said.

On Tuesday Puerto Rico narrowly missed a formal default on $355 million worth of debt issued by its Government Development Bank by utilizing a "claw back" provision on revenues pledged to pay certain other bonds.

Governor Alejandro Garcia Padilla said in testimony before a U.S. Senate Judiciary Committee on Tuesday that an imminent default "looms large."

The estimated amount to be paid for the Christmas bonus to public employees is about $120 million. The government faces a Jan. 1 deadline to make bond payments of $945 million, including $363 million in general obligation debt service, according to Moody's Investors Service.

"The government is undertaking all possible efforts to meet that obligation (of paying the Christmas bonus). That is the intent of the administration," Ortiz said. He added the government has never missed a payment since the law was enacted in 1969.

(Reporting by a contributor in San Juan; Writing by Daniel Bases in New York; Editing by Tom Brown)