Puerto Rico Electric Power Authority, the island's ailing power utility, yesterday reopened a long-agreed debt restructuring deal that drew ire from bondholders and put the stock of credit insurers under further selling pressure, Reuters reported. The new restructuring proposal alters the 15 percent reduction in creditor principal, removes the requirement for an investment grade credit rating on restructured debt and decreases the size of a reserve fund put in place to insure payments are made on the bonds. "That (investment grade) was never a realistic ask. I would love to say that we would have investment grade bonds, but it is just not true," said Elias Sanchez, an official in Governor Ricardo Rossello's office. In 2015, PREPA hammered out a restructuring deal with creditors that was seen as a potential roadmap for a broader restructuring of the U.S. commonwealth's crippling $70 billion debt load. PREPA alone has more than $8 billion in debt to restructure. Under the new deal, 80 percent of the original debt would move into securitization bonds backed by a dedicated charge on customer bills. Read more.
In related news, the House Committee on Natural Resources will hold an oversight hearing at 10 a.m. ET today on the status of the Puerto Rico Electric Power Authority (PREPA) Restructuring Support Agreement. Click here for the witness list and prepared hearing materials.
Additionally, Puerto Rico's governor proposed measures on Monday to reduce anticipated budget cuts at the University of Puerto Rico to $241 million by fiscal year 2021, from $450 million approved by the struggling U.S. territory's fiscal oversight board, Reuters reported. The measures, outlined by Governor Ricardo Rossello in a letter to the board, include transferring to the university some of the savings generated by upcoming cuts to healthcare spending; allowing the university to earn revenue by training public employees; and working with the island's Science and Technology Trust to monetize the university's patents, which UPR has historically struggled to do. The school's fate is a sensitive issue locally, with student groups threatening strikes over the cuts. UPR's budget has already been slashed by $348 million over the last three fiscal years, according to Rossello's letter. Read more.
