Puerto Rico may run out of cash by Sept: Gov. bank

Puerto Rico is set to run out of cash by the end of September without additional financing, and may implement emergency measures such as stopping debt repayments, according to a report by the U.S. territory's fiscal agent.

The measures could include steps to cut government spending, a "moratorium on the payment of debt service'' and "a debt adjustment for the Commonwealth,'' the island's Government Development Bank (GDB) said in a report published late Thursday.

By specifying a time when Puerto Rico could run out of money, the warnings went beyond the usual risk factors that the GDB regularly highlights in its financial reports.
The GDB will almost certainly need to begin prioritizing payments, restricting the outflow of liquid resources from its balance sheet, and searching for a market partner who may be willing to offer some sort of incremental liquidity,'' said Daniel Hanson, an analyst at Height Securities.

The GDB is trying to organize a bond issuance of up to $2.95 billion with a group of hedge funds. That deal is looking increasingly hard to achieve after Puerto Rico's legislature blocked tax reforms the hedge funds had been pushing for.