Puerto Rico Warns of $2 Billion Deficit If Forced to Pay Debts

(Bloomberg) -- Puerto Rico said it may run out of cash by February if it’s forced to cover bond payments, underscoring the pressure that’s causing the island to default on a growing share of its $70 billion debt.

The commonwealth projects that it will have a deficit of at least $2 billion in the year ending June 30 unless a debt-moratorium law is kept in place, according to a Dec. 18 report from the Government Development Bank. The law is scheduled to lapse on Jan. 31, after Governor-elect Ricardo Rossello is sworn in, though the governor can extend it by another two months.

Puerto Rico skipped about $1.5 billion of bond payments through September as Governor Alejandro Garcia Padilla conserved cash to keep the government running. The commonwealth is facing another round of large debt payments in February.

A federal board created to steady the island’s finances is working on approving a fiscal plan before those payments are due. Rossello will have to work with the seven-member board to find a way to restructure the government’s debt.