Puerto Rico Announces Agreement on Power Debt Restructuring

SAN JUAN (Reuters) – The Puerto Rican electricity company has reached an agreement with a group of creditors to allow the bankrupt American Commonwealth to restructure more than $ 8 billion in bonds, according to an announcement on Friday. government authorities.

A group of PREPA bondholders, the insurer insurer Assured Guaranty Corp., as well as the island government and the financial supervisory board created by the federal government, have entered into a restructuring support agreement that would reduce the public service debt up to 32.5%.

This decision paves the way for an adjustment plan for PREPA, which filed for bankruptcy in July 2017 after the breakdown of a previous restructuring agreement. The latest agreement, which requires the support of at least 67% of the holders of voting bonds, would result in a loss of nearly $ 3 billion in debt service payments over the next decade.

The agreement also requires the approval of an American judge seized of Puerto Rico's bankruptcy cases, as well as legislative measures.

Under the agreement, investors will exchange their PREPA bonds at 67.5 cents a dollar against new A-tranche bonds and at 10 cents a dollar against new B-tranche bonds. full payment of tranche A bonds and future demand for electricity on the island.

PREPA will reimburse the new bonds through a special levy levied on its customers. The new charge begins at around 1 cent per kilowatt hour before closing, to approximately 2,768 cents per kilowatt hour at closing and progressively to approximately 4,552 cents per kilowatt hour over the expected life of 40-year bonds.

The agreement has not yet received support from other PREPA creditors, including the National Public Finance Guarantee Corp. bond insurer. A spokesman for National declined to comment.

National public finance raised an objection last month when announcing an agreement in principle, saying that "until recently," he was excluded from the negotiations, while "no one", he said. he was the main creditor of the PREPA. National has also asked the court to appoint a receiver for the PREPA. The announcement made last Friday still does not get support.

According to government officials and boards of directors, the privatization of PREPA is underway and the contracts for transportation and distribution with private companies are expected to be in place by the second quarter of 2020.

"Now, with this agreement, we are taking a monumental step to restructure PREPA's debts and obligations and finally close the bankruptcy process," Governor Ricardo Rossello said in a statement.

If approved by a federal court, the restructuring of PREPA would be the third major transaction in Puerto Rico's efforts to restructure about $ 120 billion in debt and pensions. US judge Laura Taylor Swain has approved transactions involving Island Sales Tax-backed Bonds and the Government Development Bank.

The financial and operational problems of the PREPA were aggravated by the Hurricane Maria, which fell on the island in September 2017, decimating an electricity network already in difficulty because of the bad collection of tariffs, the rate of rotation high management and lack of maintenance.