Puerto Rico says it will default on some loans

Puerto Rico said Wednesday that it would default on part of $1 billion in bond payments due January 1, blasting "hedge and vulture fund" creditors for blocking the restructuring of the island's debt.

Alejandro Garcia Padilla, governor of the US island territory struggling with more than $70 billion in debt, said that it would miss about $37 million in payments to ensure the government has enough funding to pay salaries, pensions and other creditors.

Garcia Padilla said most of the $1 billion due by the government and about a dozen official agencies would be paid, including a key $335 million payment on bonds issued directly by the territory.

In that way, he said, Puerto Rico could avoid being called into general default by creditors and credit-rating agencies.

But he also warned that Puerto Rico's ability to make more payments over the coming months would be restricted, and it needed to reserve funds for general use following sweeping spending cutbacks over the past year.

"My government now has the responsibility to protect all Puerto Ricans as much as possible," he said in a speech in Spanish in San Juan.

He also urged the US Congress to act on proposed legislation that would allow the Caribbean island of 3.5 million people to enter bankruptcy protection, which would force all its creditors to join in restructuring its finances, possibly including writing off some of the huge debt burden.

Congress blocked the legislation earlier this month, which Garcia Padilla alleged was done under pressure from bondholders.

"We all know that creditors have spent a fortune on lobbying against Puerto Ricans in Congress," he said.