In a sign of the challenges that the federal board overseeing Puerto Rico's debt workout might face, the island's power authority's deal to restructure more than $8.3 billion remains mired in litigation, Bond Buyer reported yesterday. The Puerto Rico Electric Power Authority (PREPA) and its creditors have been moving toward a comprehensive restructuring since the summer of 2014. Business groups, unions and businesses have challenged the deal, and the Puerto Rico government is enabling legislation in seven lawsuits. PREPA and its creditors initially "welcomed the lawsuits," thinking that the courts would validate the agreement and enabling legislation, according to Moody's Investors Service vice president Rick Donner. In PREPA's plan, a group of forbearing bondholders agreed to accept 85 cents on the dollar in an exchange for securitized bonds, waive principal payments for five years and accept lower-interest rates. They accepted these terms in exchange for an overhaul of the utility's business and electric rate increases. Part of the plan relied on the passage of an energy-sector overhaul law, known as the PREPA Revitalization Act, in February. The U.S. has since enacted the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) to help the Commonwealth and investors work though the island's mountain of debt. PROMESA included provisions for the PREPA deal to go forward independently of PROMESA's Oversight Board and the courts. Read more.
For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.
