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A federal judge on Tuesday tentatively approved a portion of the newest plan to restructure $10 billion of debt owed by Puerto Rico’s power company amid heated negotiations between creditors and the U.S. territory’s government, the Associated Press reported. The overall debt restructuring plan has been amended four times this year by a federal control board that oversees Puerto Rico’s finances. A confirmation hearing is set for March 2024 as various bondholders continue to oppose the plan. The board did not have immediate comment on the judge’s decision regarding the plan’s disclosure statement, which requires modifications before bondholders vote on it. The decision was issued after an hours-long hearing that drew protesters to the courthouse who are opposed to electric bill increases outlined in the plan. The bankruptcy of Puerto Rico’s Electric Power Authority has dragged on for years amid intense debate on how to restructure its debt — the largest of any government agency in the U.S. territory. Numerous restructuring attempts have failed, with several creditors seeking to recuperate more money than what the plan currently offers. The plan was amended for a third time in August and a fourth time over the weekend. The newest proposal seeks to cut the power company’s debt by nearly 80%, to some $2.5 billion. If approved, it is expected to lead to increases in residential and commercial power bills that already are among the highest of any U.S. jurisdiction.

A collection of bondholders and insurers of Puerto Rico Electric Power Authority (Prepa) debt are banding together in their opposition to the bankrupt utility’s proposal to slash its debt by 75%, Bloomberg News reported. GoldenTree Asset Management, Syncora Guarantee, Assured Guaranty and certain members of an ad hoc group of the power utility’s bondholders — which includes Invesco Advisers — entered a cooperation agreement where they pledge to work together against the agency’s potential debt-cutting plan, according to a court document. The amount of creditor opposition to Prepa’s restructuring plan is greater than those supporting it. GoldenTree and the other parties in the new agreement hold or insure more than 49%, or about $4 billion, of the utility’s roughly $8.3 billion of outstanding debt. That’s more than the $2.4 billion held by a investor group led by BlackRock Financial Management that has signed on to the debt-cutting proposal. The agreement between GoldenTree and others directs the firms to “cooperate and coordinate activities in good faith (to the extent practicable and subject to the terms hereof) with the other parties to support the parties’ efforts in connection with any potential transaction and opposition to the plan,” according to the court document filed Tuesday. The Prepa ad hoc group holds a combined $2.3 billion of Prepa debt, as of Oct. 1, and along with Invesco includes MacKay Shields, Goldman Sachs Asset Management and Alliance Bernstein, among other firms, according to a court document. The pact aims to prevent bondholders or insurers from striking their own deals with Prepa and Puerto Rico’s financial oversight board, which is managing the island’s bankruptcy cases. GoldenTree and others claim that the BlackRock group forged their own debt-cutting plan with the oversight board and excluded other creditors.

In the decade since hedge fund billionaire John Paulson took a grand gamble on Puerto Rico, he’s faced the wrath of the markets and mother nature. He’s navigated hurricanes, earthquakes, the pandemic and the largest municipal bankruptcy in U.S. history to amass a portfolio of luxury hotels and resorts, high-end office blocks, and auto dealerships catering to the island’s rich, Bloomberg News reported. Now, just a few months after breaking ground on one of San Juan’s tallest and most exclusive residential towers, Paulson is facing a new wave of threats: lawsuits that strike at the heart of his Caribbean empire. In New York, he’s caught in a bitter divorce, with his ex-wife alleging that he manipulated the value of one of his Puerto Rican properties to drain at least $10 million from a trust for his kids. On the island, he’s facing lawsuits by his longtime business partner, Fahad Ghaffar, who claims Paulson is trying to cheat him out of his share in their Puerto Rico ventures.

A recent decision made by U.S. District Judge Laura Taylor Swain in the bankruptcy proceedings of the Puerto Rico Electric Power Authority (PREPA) has profound implications, particularly for the fairness and efficiency of capital markets, as well as the access of state and local governments to municipal bonds, according to a Fox Business commentary by Matthew Whitaker, co-chair of the Center for Law and Justice at the America First Policy Institute and the former acting attorney general under the Trump administration. It is imperative that we comprehend the potential consequences of this ruling, as it could lead to escalated costs and hindered infrastructure development and also burden taxpayers with higher financial obligations, according to Whitaker. In the bankruptcy proceedings of the power utility, Judge Swain sided with borrowers and concluded that special revenue bondholders do not hold a secured claim on current and future net revenues. Furthermore, the ruling stated that the original legal obligation of the borrowers is not the face value of the debt, but rather what the borrower (in this case "PREPA") can feasibly repay. This ruling raises concerns regarding its broader implications for the municipal bond market. Read more.

*The views expressed in this commentary are from the author/publication cited, are meant for informative purposes only, and are not an official position of ABI.

An increasing number of creditors are pushing back against a plan to cut the debt load of Puerto Rico’s bankrupt power utility by 75%, with investors and insurers accounting for $3.6 billion of the bonds set to vote against the proposal, a lawyer warned yesterday, Bloomberg News reported. Investors holding approximately $1.8 billion of Puerto Rico Electric Power Authority debt plan to join GoldenTree Asset Management, Syncora Guarantee and Assured Guaranty in opposing the restructuring plan submitted Friday to the court by a federally appointed financial oversight board, Thomas Lauria, a lawyer representing GoldenTree, said Wednesday during a court hearing before U.S. District Court Judge Laura Taylor Swain. Prepa, as the utility’s called, is seeking to restructure $8.3 billion after years of mismanagement and economic decline. The amount of bonds in opposition could increase to about 50% of the utility’s debt, Lauria said. “They intend to vote against the plan,” Lauria told Judge Swain. That $3.6 billion against the debt-cutting plan surpasses the creditor pool that’s in favor of it. That includes an ad hoc group of bondholders led by BlackRock Financial Management along with National Public Finance Guarantee. Swain plans to hold a confirmation hearing on that plan in March, she said Wednesday.

A new plan for restructuring $10 billion in debt owed by Puerto Rico’s power company was filed late Friday in the latest attempt to end a lengthy bankruptcy process marked by acrimonious negotiations, the Associated Press reported. The plan filed by a federal control board that oversees the U.S. territory’s finances would cut the debt of Puerto Rico’s Electric Power Authority by nearly 80% to some $2.5 billion. “We hope that we will be closing not just the chapter but most of the book on the largest public sector bankruptcy in the United States,” Robert Mujica, the board’s executive director, said in a meeting with reporters. If confirmed by a federal bankruptcy judge, the plan would mean an increase in already high power bills for many people on the island if the new charge is approved by Puerto Rico’s Energy Bureau. On average, residential bills would increase by nearly $9 a month and commercial bills by $35. Some 1.4 million customers would not pay the new charge if they consume less than 425 kilowatt-hours a month, the plan states. The average monthly power consumption for a U.S. residential customer is about 886 kilowatt-hours, according to the U.S. Energy Information Administration.

A group of bond investors is expected to back a new restructuring plan for Puerto Rico’s power utility but would have to contend with other creditors that want to keep fighting for a better deal, the Wall Street Journal reported. BlackRock, Nuveen and Franklin Advisers are nearing a restructuring deal to write down $8.3 billion in debt owed by the bankrupt electric monopoly to a fraction of that amount. The new deal would open a path to ending the Puerto Rico Electric Power Authority’s six-year bankruptcy case and has divided bondholders that until recently were united in negotiations. Bondholders including GoldenTree Asset Management are preparing to battle in court to try to sink the debt plan, due to be filed in court today. BlackRock and others owed nearly $2.4 billion recently broke with a longstanding Prepa bondholder committee advised by law firm Kramer Levin Naftalis & Frankel and formed their own splinter group with lawyers from Paul Weiss Rifkind Wharton & Garrison, court records show. GoldenTree also has hired its own lawyers from White & Case.

Puerto Rico’s bankrupt utility, which needs to restructure nearly $9 billion of debt, is closing in on a deal with at least two bondholders as soon as this Friday, Bloomberg News reported. BlackRock Financial Management and Taconic Capital Advisors are expected to reach a settlement with the island’s financial oversight board by a Friday deadline on how to restructure the debt of Puerto Rico’s Electric Power Authority or Prepa, according to a person familiar with the negotiations. That’s a step forward for the board, which is managing Prepa’s bankruptcy as the island struggles to modernize its aging power grid to help boost its battered economy. The board has reached a tentative restructuring agreement with investors of “substantial amounts” of utility debt, according to its lawyers in a court document filed Thursday. But Prepa needs to get the majority of its creditors to endorse the deal and there’s already been grumblings about the debt-restructuring proposal from members of an ad hoc group of bondholders and insurers not yet brought into the proposal. GoldenTree Asset Management, which held $825 million of Prepa debt as of Aug. 14, claims it has been shut out of bondholder negotiations, according to court documents. While Dominic Federico, Assured Guaranty’s chief executive officer, described the power utility’s current offer in an Aug. 9 earnings call as “insulting” and said the insurer would seek litigation. The company guaranteed $446 million of Prepa’s net par debt, as of March 31.

Ritzy hotels and luxury restaurants are sprouting up along Puerto Rico’s white-sand beaches and crystalline waters. Hedge fund executives and crypto exiles are moving in, lured by lucrative tax breaks. But it’s the hum of privately owned generators that make those lifestyles possible, and shield this set of the island’s inhabitants from the reality experienced by the vast majority. Puerto Rico’s aging and fragile power company was already bankrupt and in desperate need of repair when Hurricane Maria tore across the island in 2017. The storm caused more than $90 billion worth of damage and knocked out electricity in some areas for almost a year. Since then, the management of the Puerto Rico Electric Power Authority, or Prepa, has been put into private hands, but problems persist, Bloomberg News reported. Blackouts — even on sunny days — are depressingly common, and the island typically has the most expensive electricity of any US jurisdiction but Hawaii and Alaska. The power woes are an additional burden on an island where 40% of the population lives in poverty and an affordability crisis has deepened, thanks in part because of the influx of wealthy residents. Real gross national product is still below 2016 levels amid hurricanes, earthquakes and mismanagement. It’s expected to shrink again this year, despite an influx of $120 billion in federal reconstruction aid. Meanwhile, pension payments and debt service take up 25% of the commonwealth’s budget even after bankruptcy.