Puerto Rico power utility, bondholder group reach tentative agreement with insurer
step toward $9B debt restructuring, Assured set to withdraw from lawsuit seeking receivership for the utility
SAN JUAN – The Puerto Rico Electric Power Authority (Prepa) and the Ad Hoc Group of Uninsured Bondholders, which have $3 billion in the utility’s bonds have reached a tentative agreement with bond insurer Assured Guaranty that would help restructure the public power corporation’s $9 billion debt.
The deal, which was initially posted about by Caribbean Business on social media, was disclosed in an urgent motion filed by Prepa through the island’s Financial Oversight & Management Board and Fiscal Agency & Financial Advisory Authority (Aafaf by its Spanish acronym), seeking to extend, by two weeks, the deadlines of a lawsuit brought by several monoline bond insurers to put Prepa into receivership. The suit was filed in October by Assured, National Public Finance
In July, Prepa and its Ad Hoc Group of uninsured bondholders, which has a combined $3 billion exposure, reached an agreement in principle for a definitive restructuring support agreement (RSA).
The motion filed April 9 revealed that Assured has also joined the RSA but the two other bnond insurers have not.
“Despite negotiations with the two other Monoline insurers of the Prepa Bonds (and Assured’s co-movants on the Receiver Motion), National and Syncora, no agreement has been reached with these parties,” the motion reads.
“While Syncora consented to the extension,” Reuters reports, “National filed an objection on Wednesday, saying that ‘until very recently’ it was excluded from negotiations even though it is PREPA’s largest creditor. National also said a receiver was ‘urgently’ needed to get PREPA out of bankruptcy and lead a privatization effort.”
The creditor parties to the RSA, Assured and the Ad Hoc Group, will represent holders of approximately half of the outstanding Prepa bonds. The aggregate holdings of National and Syncora represent less than 15% of the Prepa bonds.
The motion says Assured and the parties are in the final stages of documenting and executing the agremeent.
The latest motion in Prepa’s bankruptcy case says the two-week extension in the case schedule will allow for the culmination of the deal. Assured, which has challenged the constitutionality of the fiscal board, is slated to withdraw from the lawsuit seeking a receiver for the utility, which is set for a May 15 court hearing.
Puerto Rico has already reached restructuring deals in its bankruptcy case under the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa) for the Government Development Bank and the Sales Tax Financing Corp. (Cofina by its Spanish acronym).