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Puerto Rico water utility’s restructuring moves further away

By on May 10, 2018

SAN JUAN – Although government officials have said the restructuring of the Puerto Rico Aqueduct and Sewer Authority’s (Prasa) debt, through a mutual consent agreement with creditors under the Promesa law was imminent, the possibility no longer appears to be in the near future.

Prasa has informed the markets that it has extended a forbearance agreement with one of its creditors, signaling what appears to be a roadblock in the negotiation of its close to $5 billion debt.

According to a notification to municipal markets, Prasa said a deferment of certain bonds issued to the U.S. Department of Agriculture’s Rural Development Program, Rural Utility Services in the 1980s, have been extended to June 30. The deferment had expired April 30.

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“…On April 30, 2018, RD/RUS extended, through June 30, 2018, a forbearance agreement granted to PRASA on July 1, 2016, as amended (the “Amended Forbearance Agreement”), subject to certain requirements and conditions,” the utility informed the markets.

The public corporation has been in talks to restructure its $4.7 billion debt since last year, discussing the postponement of interest payments, extending maturities and lowering interest rates. The debt includes loans of $580 million from the Clean Water State Revolving Fund (SRF) and $390 million from the Rural Development Program (RDP).

Prasa’s fiscal plan calls for a proposed second rate hike in July and moderate annual increases until 2022. However, if the utility fails to renegotiate its debt or borrow from markets, affordable rates for its customers would be left out of the picture.

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