NEW YORK (Bloomberg) — Puerto Rico’s bond insurers — including Bermudian-based Assured Guaranty — are urging the commonwealth to negotiate with creditors as speculation increases that the island will default July 1 for the first time on general-obligation debt.

While commonwealth officials, investors and bond-insurance companies have been negotiating for months on how to reduce Puerto Rico’s $70 billion of debt, specific talks over addressing next month’s general-obligation payment have yet to occur, Nader Tavakoli, president and chief executive officer at Ambac Financial Group, said during a Debtwire conference in Manhattan yesterday. Such talks could allow Puerto Rico to avoid lawsuits, put off some of the payment, or restructure debt before next month’s deadline.

“There really have been no good-faith discussions,” Mr Tavakoli said. He said avoiding a default will be “an uphill climb”.

The lack of communication with creditors, out-of-date financial information and a local debt-moratorium law that allows the governor to temporarily suspend principal and interest on commonwealth debt ignores the rights of investors, Dominic Frederico, chief executive officer at Assured Guaranty, said during the conference.

“I’ve never seen behaviour at this level with the treatment of creditor rights,” Mr Frederico told a packed room of about 150 participants. “The current behaviour will really impact the ability to access the market for a hell of a lot longer than five years.”

Governor Alejandro Garcia Padilla has said the island is unable to repay $805 million of principal and interest due July 1 on the securities, which have the highest legal priority, and also continue providing essential services for the island’s 3.5 million residents. Those payments are part of $2 billion owed by Puerto Rico and its agencies next month.

The default could become the biggest yet for the Caribbean island, which began skipping payments in August on some bonds with the weakest legal protections. The anticipated lapse comes as Congress is advancing legislation aimed at resolving Puerto Rico’s fiscal crisis by giving a federal control board power to oversee the government’s budget and a potential restructuring of its debt.

Melba Acosta, president of the Government Development Bank, which is overseeing the island’s debt restructuring, said during a separate panel discussion that the island is in constant talks with creditors.

“We are in fact in conversation,” Mr Acosta said. “We are in fact negotiating.”