For the sixteenth time in the last 14 months, the Puerto Rico Electric Power Authority’s (PREPA) creditors extended the agency’s debt restructuring support agreement (RSA).
Nevertheless, on this occasion, the bondholders, insurers, and banks financing PREPA’s fuel purchases granted Rosselló Nevares’s administration only five days to reach an agreement. This, after the Governor asked to review the agreement reached on December 2015, which has not yet materialized despite multiple concessions from the creditors, a new legislation, and the endorsement from the Puerto Rico Energy Commission.
The five-day RSA extension (until April 5) was announced yesterday by the Governor himself during a press conference at the Puerto Rico Convention Center, where he insisted that obtaining better conditions to renegotiate PREPA’s public debt is key for the Island’s economic development.
The current RSA entails having the debt principal of PREPA’s uninsured bondholders cut back by 15%, and they would not receive repayments on the principal for the next five years. Meanwhile, the insurers refinancing PREPA’s upcoming debt maturities and the banks financing their fuel purchases would collect less interest and would extend the repayment of almost $694 million in credit lines.
However, on January 27, when the bondholders were inclined to make changes that would have resulted in a decrease of once cent per kilowatt-hour, the Fiscal Agency and Financial Advisory Authority (FAFAA) took control of PREPA’s negotiations after the approval of legislation for those same purposes. FAFAA then established that they would review the RSA, which has been in negotiations since mid-2014 and has cost the Puerto Rican taxpayers millions of dollars.
FAFAA is seeking, among other things, a 20% increase in PREPA’s debt principal, and to modify other terms of the agreement in order to reduce the impact of the renegotiation on the electricity rates.
The Government’s move to renegotiate PREPA’s RSA—with the support of the Oversight Board (OB)—has sparked growing animosity from several of the Island’s creditors, and a warning from the Puerto Rican Government’s primary bondholders. This warning has been relayed by the bondholders’ lawyers and financial advisors, who state that aborting PREPA’s process would further hinder any other debt renegotiations in the Island.
Yesterday, FAFAA Executive Director Gerardo Portela said he couldn’t offer details on any counteroffers made by PREPA’s creditors on Wednesday, but he seemed optimistic that the negotiation could end up benefiting the public corporation and its customers.
Additionally, to answer questions from El Nuevo Día regarding the mediation process that FAFAA and the OB aim to adopt with the Island’s remaining creditors, Portela remarked that the Government is looking to sit at the table as soon as possible, even if the mediation process doesn’t materialize.