The federally appointed board overseeing the bankruptcy of Puerto Rico’s electric power authority must submit a new debt adjustment plan quickly after an existing agreement to restructure more than $8 billion in debt was axed by the island’s governor on Tuesday, Reuters reported. U.S. District Judge Laura Taylor Swain instructed the oversight board on Tuesday to develop a plan, or a detailed plan outline, by May 2. Swain indicated that she may consider dismissing the power authority’s entire court-supervised bankruptcy-like process, known as Title III, as well, for failing to show that a feasible plan can be put together in a timely fashion. The power authority, known as PREPA, filed for Title III protection in 2017 alongside the commonwealth itself. Swain approved the commonwealth's separate $135 billion restructuring plan in January. In 2019, PREPA and the board cinched a restructuring deal with a group of PREPA bondholders, including BlackRock Financial Management, that would reduce the utility’s debt by up to 32.5%. It would have required new legislation to issue new bonds that would be backed by new charges to PREPA customers. Governor Pedro Pierluisi's decision to back out of the agreement on Tuesday followed longstanding opposition to such legislation by lawmakers. Pierluisi said on Tuesday that he hopes to work toward a new agreement that, among other things, does not impose charges on private power generation. After the governor terminated the deal, Swain issued an order instructing the board, the government, the bondholders and other interested parties to discuss the possibility of entering mediation. She also stated that if the board is not able to develop a plan or detailed outline of a plan by May 2, it must either submit a detailed schedule to litigate outstanding issues or explain why she shouldn’t dismiss the case outright. The termination of PREPA's restructuring deal "presents the risk of a major setback in progress toward readjustment of PREPA's liabilities," Judge Swain said.
