Wednesday, August 15, 2018

Bondholder group allowed to intervene in Feb. 15 hearing to evaluate $1.3B loan to Puerto Rico power utility

By on February 9, 2018

SAN JUAN – Judge Laura Taylor Swain on Friday allowed the Ad Hoc Group of General Obligation Bondholders to intervene in the Feb. 15 hearing to evaluate the Puerto Rico Electric Power Authority’s (Prepa) request for a $1.3 billion loan from the commonwealth.

The Ad Hoc Group objects to the loan because of the repercussions it would have on the commonwealth’s finances and its ability to pay debt since filing for bankruptcy last year under Title III of the Promesa federal law.

The ailing public power utility claims that “undisputed” evidence shows it is running out of money and that without an injection of liquidity in the near term there will be insufficient cash to continue to provide power to Puerto Rico.

Judge sets final hearing on $1.3 billion Puerto Rico power utility loan for Feb. 15 

“If Prepa were to cease operating, the restoration efforts of the Commonwealth and all its instrumentalities would be upended. Outmigration of residents and business would accelerate. Revenues would fall. Human hardship would be exacerbated as potable water, power for medical procedures, communications, and open schools would disappear again. The cost of restoration would increase,” the utility said.

Creditors such as the Ad Hoc Group say Prepa can obtain liquidity from other sources of financing or ameliorate its situation with other loan offers it has received. Prepa says the commonwealth loan is the only alternative it has because of its favorable terms, including a zero to low interest.

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