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Prepa Brings Creditors back into the fold; Deadline to Pass Revitalization Act Extended to Feb. 16

By on January 27, 2016

SAN JUAN – The Puerto Rico Electric Power Authority (Prepa)  announced late Wednesday that it has entered into an amended restructuring support agreement (RSA) with the Ad Hoc Group of Prepa bondholders, comprising municipal bond investors and hedge funds, its fuel line lenders, the monoline insurers and the Government Development Bank. Prepa also entered into an amended bond purchase agreement with the Ad Hoc Group and the monoline insurers.

The amended agreement, which includes agreements with holders of approximately 70% of Prepa’s financial debt, extended the deadline to enact the Prepa Revitalization Act to Feb. 16. In addition, the amended agreements require supporting bondholders and monoline insurers to purchase 50% of their bond purchase commitment upon the enactment of the Prepa Revitalization Act, as required by the RSA, and the purchase the remaining 50% upon the filing of a petition seeking Puerto Rico Energy Commission approval of the proposed securitization, as required by the RSA.

“The agreements reflect the mutual understanding among Prepa and its key creditors about the importance of Prepa’s financial restructuring and comprehensive transformation,” Lisa Donahue, Prepa’s chief restructuring officer, said in Wednesday’s statement. “We have a long way to go, and there remain many uncertainties, but if implemented, Prepa’s transformation will have a positive, lasting impact on its finances, operations and culture. We appreciate the hard work of many diverse parties who remain committed to Prepa’s transformation.”

The Prepa Bondholder Group also issued a statement saying that under the new terms of the RSA, “the parties expect that…the PREPA Revitalization Act will be enacted into law in a form that is deemed reasonably acceptable by creditors.”

“We continue to support the Prepa Revitalization Act and the RSA deal as the path to providing Prepa a way back to stable, low-cost financing through access to the United States municipal bond market, and the lowest long-term utility rates possible for the Puerto Rican people.”

Under the new Bond Purchase Agreement (BPA), the Bondholder Group and other RSA creditors would provide $111 million of additional financing through the purchase of new bonds – with half the notes to be issued once the securitization legislation is passed and the remaining half to be issued once the securitization structure is submitted to the Energy Commission.

“We are pleased to have reached this agreement with PREPA, which puts everyone back on track to consummate a deal that will benefit all stakeholders, especially the people of Puerto Rico,” said Stephen Spencer, financial adviser to the Prepa Bondholder Group. “We continue to support the Prepa Revitalization Act and the RSA deal as the path to providing Prepa a way back to stable, low-cost financing through access to the United States municipal bond market, and the lowest long-term utility rates possible for the Puerto Rican people.”

Spencer continued: “We have been encouraged by recent public statements from Senate President Bhatia, Speaker Jaime Perelló, Senator Ramón Luis Nieves, Rep. Jesús Santa, Governor García Padilla, and leading public officials on the island, which have made it unequivocally clear that they want to get this deal done and that the additional 25 days we are extending beyond the original deadline is sufficient for the legislation to be passed. We will continue to work collaboratively with both Puerto Rico’s legislators and Prepa to help ensure a bill that preserves the essential elements of our plan and that the necessary milestones we have agreed upon are achieved, for the benefit of all parties involved.”

Meanwhile, lawmakers are still fine-tuning the Prepa Revitalization Act, legislation that would enable the RSA. The Senate, which is going to pass the bill first, is not yet certain when the amended bill will finally go to a vote.

 

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