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Restructuring support agreement may cut Puerto Rico utility’s debt by 30%

By on May 2, 2019

Judge set to hear Prepa receivership motion June 13

SAN JUAN – The executive editor of Puerto Rico’s Financial Oversight and Management Board, Natalie Jaresko, said Thursday that the restructuring support agreement for the Puerto Rico Electric Power Authority “looks like” it will reduce the utility’s debt by 30%.

Jaresko made the remark at a U.S. Natural Resources Committee hearing following questions related to cuts in restructured debt and debt sustainability. Four years ago, AlixPartners, which had been in charge of restructuring Prepa’s debt, had negotiated a deal in which creditors agreed to a 15% haircut. That deal was rejected by the oversight board, prompting Prepa to file for bankruptcy under Title III of the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa).

At an omnibus hearing April 24, National Public Finance Guarantee Corp. insisted that the court stop granting extensions to its request for a receiver for Prepa. On that day, the board said the utility was close to finalizing a definitive restructuring support agreement with the Ad Hoc Group of Bondholders and other parties. The court granted a one-week extension, until May 3.

On May 1, Prepa, Puerto Rico’s Fiscal Agency and Financial Advisory Authority, the board and Assured Guaranty, which has agreed to join the RSA and is no longer pursuing receivership for Prepa, sought a five-day extension to file opposition papers to the receivership motion.

“The Settling Parties are pleased to report that over the past several days they, together with the Ad Hoc Group, have completed negotiations and come to an agreement on the terms of the Definitive RSA. However, the Settling Parties and Ad Hoc Group still must finalize a few exhibits before the Rule 9019 Motion can be finalized and filed and the related motion to stay proceedings can be filed pending determination of the Rule 9019 Motion,” the document reads.

The legal action seeking a receiver was filed last year by National Public Finance Guarantee Corp., Assured Guaranty Corp., Assured Guaranty Municipal Corp., and Syncora Guarantee Inc., all holders or insurers of bonds issued by Prepa, representing about 27% of the approximately $8.3 billion in outstanding bond debt. Assured, however, has since dropped from the case.

Judge Laura Taylor Swain granted the extension requested by the board and set a hearing for the receiver motion at the omnibus hearing scheduled for June 13.

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