Prepa to Pay Debt Due in January
SAN JUAN–The San Juan Superior Court has upheld the constitutionality of the Puerto Rico Electric Power Authority’s (Prepa) Revitalization Act, validating the law for the first time.
The information was provided in a notification that Prepa’s trustee, U.S. Bank National, sent to the markets Friday in which the public corporation also says it intends to make its Jan. 3, 2017 service debt payment. Prepa also clarified it is in possession of the funds needed for payment and not U.S. Bank National, further indicating that it intends to deliver the funds by Jan. 1, 2017.
The utility, however, remains in default of various nonpayment obligations under the trust agreement, including the failure to transfer funds from the General Fund to the Revenue Fund in accordance with Section 506 of the trust agreement.
“The trustee has not received any direction by bondholders to seek relief from stay [imposed by the Puerto Rico Oversight, Management & Economic Stability Act, also known as Promesa] or otherwise pursue enforcement actions under the trust agreement,” the notification says.
Regarding the revitalization act, stakeholders were given the opportunity to challenge it in court. In a case titled Electric and Irrigation Workers Union vs. Prepa, the court this week upheld the constitutionality of the Prepa’s revitalization act and overruled the plaintiffs’ challenges with respect to the restructuring order issued by the Puerto Rico Energy Commission. “The validation process is not complete, however, in that an appeal is possible and the other validation proceedings are still pending,” the corporation said.
The authority extended to March 31, 2017 its Restructuring Support Agreement (RSA), which was entered into prior to the enactment of Promesa.
The RSA contemplates a consensual refinancing of the authority’s bonds through an exchange of the bonds for a lesser aggregate amount of securitized bonds to be issued by a newly formed Prepa revitalization corporation and backed by a three cent per kilowatt-hour transition charge to be paid by Prepa’s customers.
“Because the board created under Promesa has designated the authority as a “covered territorial instrumentality,” the authority may not be authorized to exchange, modify or enter into similar transactions with respect to the bonds without the approval of the board. The RSA provides that it will terminate automatically on January 31, 2017 if the parties have not agreed to the supplements to the RSA for the purpose of effecting the contemplated debt restructuring through Promesa or another mutually agreeable mechanism by that date,” the notice to the markets said.