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Puerto Rico's power authority nears $9 billion debt restructuring deal

Assured Guaranty Corp is finalizing an agreement with PREPA and a group of bondholders to restructure part of the bankrupt utility’s debt.
Image: Puerto Rico power outage
Victor Vazquez, employee of the Puerto Rico Electric Power Authority (PREPA), during repair work on power lines affected by Hurricane Maria, on April 18, 2018 in San Juan, Puerto Rico.Jose Jimenez Tirado / Getty Images file

An agreement in principle between a bond insurer and the Puerto Rico Electric Power Authority (PREPA), disclosed in a late Tuesday court filing, moves a deal to restructure about $9 billion of the bankrupt utility’s debt closer to the finish line.

Assured Guaranty Corp is in the “final stages” of documenting and executing an agreement with PREPA and a group of bondholders, who reached a deal with the utility in July covering more than $3 billion of debt, according to a motion filed in U.S. District Court in Puerto Rico.

The so-called definitive restructuring support agreement (RSA) would cover about half of PREPA’s outstanding bonds.

“If finalized, the definitive RSA will provide PREPA and its creditors with a path toward restructuring billions of dollars in legacy debt and would facilitate PREPA’s transformation process and development of a plan of adjustment,” the filing stated.

A PREPA deal has lagged court-approved settlements with the bankrupt U.S. commonwealth’s Government Development Bank and Sales Tax Financing Corporation (COFINA) creditors. The island has been in federal court since May 2017 in an attempt to restructure about $120 billion of debt and pension obligations.

The latest motion in PREPA’s bankruptcy asks for a two-week extension in the schedule for litigation filed in October by Assured and two other bond insurers seeking a court-appointed receiver for PREPA. Assured contemplates withdrawing from the receiver lawsuit, which is currently set for a May 15 court hearing, if a settlement is approved, the filing said.