Puerto Rico's public utility PREPA and a key bondholder group have reached the framework of a debt restructuring deal that would include a repayment reduction of up to 15 percent for bondholders, Reuters reported today. The deal, under which PREPA would issue new, securitized debt, likely with a higher credit rating, had not been officially signed and could still fall apart. But parties were verbally committed to it yesterday, ahead of a midnight deadline to try to forge a restructuring pact. PREPA, buckling under $9 billion in total debt, has been trying to negotiate a restructuring with an ad hoc group of its bondholders for about a year. A consensual deal at PREPA, seen as a microcosm of Puerto Rico's broader fiscal troubles, could generate momentum to help the island sort out its $72 billion debt load. Under a forbearance agreement with creditors, PREPA was safe from lawsuits as sides negotiated. Creditors could terminate the deal if a restructuring pact was not reached by midnight on Tuesday, Sept. 1. Read more.
In related news, Puerto Rico development bank officials are preparing to enter confidential debt restructuring talks with a group of the agency’s bondholders as soon as next week, Bloomberg News reported yesterday. The Government Development Bank, which has about $5 billion of debt and acts as a lender to the U.S. territory and its local governments, has drafted a non-disclosure agreement that would govern talks with a bondholder group represented by law firm Davis Polk & Wardwell LLP. Puerto Rico representatives will ask some of the creditors to sign the agreement in order to start negotiations as soon as Sept. 8. Read more.
As Puerto Rico continues to map out plans to restructure nearly $72 billion in municipal debt, ABI has launched the "Puerto Rico in Distress" website to help navigate the news and analysis of the island's ongoing debt crisis. The site draws upon a number of resources to provide the latest news and analysis on Puerto Rico’s debt crisis, as well as proposals for restructuring its municipal debt (as a U.S. territory, Puerto Rico is not eligible to restructure its debts under chapter 9 of the Bankruptcy Code). For updated news and analysis on Puerto Rico's debt crisis, be sure to visit, and bookmark, ABI's "Puerto Rico in Distress" website.
