Trump: Puerto Rico Needs to Write Down Debt

The push to empower the territory of Puerto Rico to write down its debts–something supported by the Obama administration, the island’s government, and some Republican leaders in Congress–appeared to gain backing Wednesday from Donald Trump, the likely Republican presidential nominee.

“The problem with Puerto Rico—there’s far, far, far too much debt,” Mr. Trump said in an interview with CNN. “Don’t forget: I’m the king of debt. I love debt… I understand that stuff better than anyone else.”

Mr. Trump’s position puts him largely in agreement with Puerto Rico Gov. Alejandro Garcia Padilla, a Democrat, who last year declared the island’s debts unpayable. The Obama administration has been working to secure legislation that would allow the territory to write down some debts in a streamlined fashion.

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The interview offered Mr. Trump’s most detailed comments so far on one of the few legislative issues Congress could tackle before this fall’s election. Puerto Rico missed most of a $422 million payment on Monday and has warned that other defaults are likely. The U.S. territory has been in recession for a decade and tens of thousands of residents, who are American citizens, have been leaving for the mainland every year.

Mr. Trump said that Puerto Rico is essentially insolvent. “You have to use the laws. You have to cut the debt way down and get back to business, because they can’t survive with the kind of debt they have,” Mr. Trump said.

Puerto Rico faces legal limbo, however, because it isn’t a state and is excluded from the federal bankruptcy code. While municipalities such as Detroit can seek relief in court, those in Puerto Rico cannot.

House Speaker Paul Ryan and other Republican lawmakers have been in deep negotiations with Treasury Department officials over legislation that would allow Puerto Rico to write down debt. It would also create a federal oversight body charged with ensuring that Puerto Rico balances its budget. Mr. Trump wasn’t asked about and didn’t say whether he would support that legislation.

Mr. Trump said he wouldn’t support a bailout—a position shared by Republicans and the Obama administration, which has repeatedly said there should be no bailout of Puerto Rico.

“Frankly, Puerto Rico’s better off if they don’t [do a bailout] because they’ll cut the bonds. They’ll cut them way down,” said Mr. Trump.

Some creditors and other critics of the bill have tried to characterize legislation authorizing debt restructuring as a bailout even though it wouldn’t require any taxpayer funds.

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