The embattled Puerto Rico Electric Power Authority (PREPA) may have a way out of its current challenges. After discussions, a deal has been reached with the owners of more than $3 billion of PREPA bonds, changing the trajectory of the utility.
According to a report by Reuters: “The restructuring agreement announced by a bondholders group largely made up of mutual funds and the utility would exchange existing bonds for new debt and link future payments to the island’s economic recovery.”
This is a significant achievement for PREPA, which has been trying to restructure its debt for the past four years. In July 2017 PREPA filed for bankruptcy but the utility was hit even harder when Hurricane Maria hit the island in September last year, decimating the power infrastructure.
The deal earlier this week has already had positive effects on PREPA bonds in secondary market trading.
There are likely to be more than $3 billion debt service cost savings over the next 20 years according to Governor Ricardo Rossello’s office and the deal has been called a ‘milestone’ agreement.
Reuters reported that “Unlike previous [sic] proposed deals with creditors, the new agreement links future debt payments to Puerto Rico’s economic recovery and minimises risk to ratepayers by setting a fixed annual transition charge, according to the territory’s oversight board, which was also part of the agreement. That board was created by the U.S. Congress under the so-called PROMESA Act.”