The Puerto Rico Electric Power Authority (PREPA) and its creditors were close to a deal Tuesday that would allow the cash-strapped utility to pay more than $400 million to bondholders, potentially staving off what investors feared might be the first default of many from the U.S. commonwealth, the Wall Street Journal reported today. A deal would mark the latest extension to restructuring talks between the cash-strapped authority and its creditors. The potential deal includes an arrangement to help the publicly owned power monopoly make its full payment due to bondholders. PREPA has nearly $9 billion in debt outstanding and has been negotiating a restructuring plan for months with creditors that include bondholders, banks and bond insurers. Analysts had said that PREPA didn’t have the money to make the payment, and investors worried a default by the authority would presage others from the commonwealth, which has about $72 billion in debt outstanding, a greater sum per capita than any U.S. state. Analysts have also said the central government may run out of cash within a month, which could lead to a government shutdown, employee furloughs and other emergency measures. Read more. (Subscription required.)
In related news, Senate Judiciary Committee Chairman Chuck Grassley (R-Iowa) does not see a path forward for legislation allowing Puerto Rico to file for bankruptcy, a potential fix the White House floated on Monday to the territory’s $72 billion debt default, the MorningConsult.com reported today. White House Press Secretary Josh Earnest told reporters that the Obama administration is not considering a federal bailout package for Puerto Rico, but he urged Congress to “take a close look” at allowing the island to restructure its debt through bankruptcy proceedings. Grassley (R-Iowa), who controls the Senate committee with jurisdiction over bankruptcy law, doesn’t see a bill passing any time soon. “At this time, there is no clear path forward,” a Grassley spokesperson said Monday in an email. “What is clear, though, is that bankruptcy isn’t going to solve all of the financial problems Puerto Rico has gotten itself into.” The aide said that Grassley wanted Puerto Rico’s plan to address “all of its underlying financial problems.” Read more.
In additional political news related to Puerto Rico, Sen. Charles Schumer (D-N.Y.) said yesterday that he will team up with Sen. Richard Blumenthal (D-Conn.) to sponsor a bill that would allow Puerto Rico’s government agencies to file for chapter 9 protection, Bloomberg News reported today. The bill would be a companion to legislation in the U.S. House sponsored by Puerto Rico’s non-voting member of Congress, Pedro Pierluisi. Schumer said that he and Blumenthal are seeking support from Senate Republicans as well. Rep. Nancy Pelosi, the top Democrat in the House, also spoke in support of the bill after the White House urged Congress on Monday to consider the legislation. Lawmakers in both the House and Senate are on an Independence Day recess and will return to Washington, D.C. next week. The island’s main electricity provider, known as PREPA, may default on a $416 million debt payment due today. Read more.
