A deal to restructure Puerto Rico's debt-laden power utility, PREPA, received new life late on Wednesday after the agency and bondholders agreed to extend a crucial deadline, Reuters reported yesterday. Righting PREPA's ship is seen as a key step in fixing Puerto Rico, which faces $70 billion of debt, a 45 percent poverty rate and a shrinking tax base as residents increasingly jump ship for the mainland United States. PREPA, with more than $8 billion in debt, had reached a restructuring deal in December with about 70 percent of its creditors, but the deal needed legislation to pass by Jan. 22 to become effective. When Puerto Rico's lawmakers failed to meet that deadline, PREPA's largest bondholder group offered an extension, but PREPA rejected it, casting doubt on an agreement that had been 18 months in the making. PREPA announced yesterday that the agency and creditors had come to terms on an extension through Feb. 16, providing breathing room for lawmakers still debating tweaks to legislation. Read more.
In related news, Senate Democrats yesterday sent a letter to Majority Leader Mitch McConnell calling for congressional action on Puerto Rico, demanding that legislation to resolve the island's financial crisis include tools to restructure debt, Reuters reported. "Restructuring legislation would not cost the federal government a single penny and would instead save U.S. taxpayers from the growing cost of inaction," said the letter to the Senate's Republican leader, signed by all 46 Democrats and independents. The letter is a challenge to Republicans who largely oppose letting the U.S. commonwealth restructure debt. Republican Sens. Orrin Hatch (Utah), Lisa Murkowski (Alaska) and Chuck Grassley (Iowa) last month introduced a bill to bring Puerto Rico's finances under federal oversight without providing for debt restructuring. Click here to read the letter.
Additionally, the House Natural Resources Subcommittee on Indian, Insular and Alaska Native Affairs will hold a hearing on Tuesday at 11 a.m. ET titled “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.” Witnesses to be announced.
Experts gather next week San Juan to discuss Puerto Rico's economic distress and other important cross-border insolvency topics at ABI's Caribbean Insolvency Symposium. Click here to register!
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
