The Puerto Rico Electric Power Authority (PREPA) needs to get insurance companies that guarantee a portion of the utility’s debt against default to endorse a conditional restructuring agreement by Thursday to avoid the risk of the deal with bondholders falling apart, Bloomberg reported yesterday. If MBIA Inc., Assured Guaranty Ltd. and Syncora Guarantee Inc. don’t sign on to the debt exchange finalized with some investors last week, then PREPA, its fuel-line lenders and the bondholder group will work to implement a recovery plan “through a mechanism to be agreed among the parties that may include, without limitation, a judicial process, including an enforcement proceeding under applicable law,” according to the Nov. 5 agreement. The insurers run the risk being liable for the repayment of about $2.5 billion of bonds if PREPA fails to make payments and the restructuring is viewed as a default. Under the agreement, about 35 percent of the utility’s bondholders agreed to absorb losses of as much as 15 percent and delay repayment to give the struggling utility more breathing room to restructure its finances as well as time to improve operations. The agency is hampered by its inability to reorganize in bankruptcy court as utilities in the mainland U.S. can.
