Dive Brief:
- Puerto Rico's electric utility, known as PREPA, has renegotiated its debt agreements with bond holders and according to Financial Times the deal could save $2.2 billion over five years.
- Governor Ricardo Rossello renegotiated a deal reached last year by his predecessor, which addressed $9 billion in utility debt, a part of Puerto Rico's $70 billion debt crisis.
- A statement from Rossello said the deal represented "fair additional contributions by all parties" and would help PREPA transform into a modern utility.
Dive Insight:
Financial Times reports the governor's office did not release details of the negotiations or remodeled debt agreements, and it is not known if creditors agreed to reduce the total debt load. The $2.2 billion in savings would come from reduced debt service obligations.
A restructuring support agreement was agreed to in late 2015 by former Gov. Alejandro Garcia Padilla. The RSA allowed PREPA to exchange debt owed to bondholders for new securitization notes valued at 85% of their existing claims.
Last summer the U.S. Supreme Court rejected Puerto Rico's bid to revive its Recovery Act, a debt restructing law that would have impacted over $20 million in utility debt. Upholding the Recovery Act could would have stopped the agreed-upon restructuring by allowing Puerto Rico to put PREPA into bankruptcy.
Rossello said in a statement that the new debt terms "will set PREPA on a path toward becoming a modern utility."
The state-owned power authority is in dire need of a capital infusion, as it remains reliant on expensive fuel oil generation and aging grid infrastructure. A 2015 presentation from the utility's own debt restructuring consultants said PREPA has “deteriorated” in recent years and is now “one of the island’s most challenged public corporations."
