The Puerto Rico Electric Power Authority, moving forward under a forbearance agreement with its creditors, appointed Lisa Donahue as chief restructuring officer, citing her success in turning around large distressed companies.
Donahue, managing director of AlixPartners and global leader of the firm's turnaround and restructuring practice, was named to the post Thursday. The appointment came after Puerto Rico passed a law in June allowing its public corporations to restructure their debt, and PREPA, which had to draw on reserves to a mid-year debt payment, entered the forbearance agreement giving it until March to straighten out its finances. PREPA has said it has about $11 billion in liabilities.
"Ms. Donahue brings more than 23 years of experience to her new role at PREPA, including world-class experience in business plan development, operational alignment, business transformation, cash management and cost reduction, negotiation, situational analysis, and debt restructuring for both domestic and international organizations," Government Development Bank for Puerto Rico spokesman David Miller said. "She also has extensive energy experience, including senior leadership roles at Calpine Corp., Atlantic Power Corp. and SemGroup."
In 2008 the Turnaround Management Association named Donahue, already working with AlixPartners, as a co-winner with Samuel Greene at Miller Buckfire & Co. of the Mega Company Turnaround of the Year award. They received the distinction for their work in turning around Calpine Corporation, one of the largest electricity providers in the United States.
Donahue became involved in November, 2005 and Calpine filed for Chapter 11 bankruptcy protection in December, 2005.
According to the Turnaround Management Association Donahue improved the company's accounting and cash management functions. The turnaround was "extremely successful," the association reported. Calpine emerged from bankruptcy in January 2008. "All the secured debt was paid in cash with interest; and unsecured creditors are expected to receive recoveries near 99%," the association reported.
In 2002 Crain's New York Business named Donahue to its 40-under-40 list of the most accomplished younger people in New York City's business world. "As a Manhattan-based principal with one of the nation's top corporate restructuring outfits, parachuting into distressed companies for a year or more as an interim executive, she has a life centered on stress," Crain's wrote. " 'There is not a lot that can send me over the edge,' Ms. Donahue said. 'In this business you have to make decisions quickly and with imperfect information.'"
Donahue will work in Puerto Rico with a four person senior team initially, Miller said. While Donahue doesn't speak Spanish, PREPA's leaders speak English reasonably well and she will bring support staff people who speak Spanish fluently.
Donahue may work at PREPA beyond March 2015, Miller said. "Donahue's focus is not only to help PREPA develop its recovery plan but also to ensure its successful implementation."
Donahue will work to make PREPA into a self-sustaining business, Miller said. "Initial areas of focus are expected to include working with the team to optimize the generation, transmission and distribution of the Island's power supply, develop a five-year business plan, refine collection and expense management processes, and enhance the overall quality of data collection and reporting."
"This is a very good step," Joan Vidra, Managing Director of
Opportunities Emerging & Frontier Markets Advisory, LLC, said of Donahue's appointment. "I still expect the process to be wrapped up in politics and I am not sure how much independent decision making capacity she will have, but I think we can expect that she'll take a holistic approach to restructuring the concern.
"The priorities will be to make the company viable in the long term, and probably to distribute the pain in the restructuring effort," Vidra continued. "I don't expect fees to rise, however . The direction PREPA will move toward is to make energy costs cheaper and operations more efficient."
"Even though bonded debt isn't really at the core of PREPA's problems, because of the liquidity situation I think it's fair to expect that the Recovery Act will be tested with PREPA," Vidra said, referring to the law that allows Puerto Rico's public corporations to restructure their debt.
"Lisa has a clear track record of helping companies in our industry and financial situation reach their goals by the deadlines required," said Harry Rodriguez, president of PREPA's Board of Directors. "She immediately convinced us that she would be able to work successfully with the existing PREPA team."
Donahue said in a statement that she's "had extensive discussions with [PREPA executive director] Juan Alicea and the PREPA management team during the interview process and have been very impressed by the knowledge and dedication of everyone I have met. I will be relying heavily on their insights as I get to know PREPA's operations," she said. "and I believe that Juan and I will be good allies in restoring PREPA as a strong and self-sustaining utility that is able to meet its customers' needs, improve its infrastructure and manage its debts."
Axios Advisors managing partner Triet Nguyen said in a column in MuniNetGuide.com that Donahue brings "impressive" credentials to the job. "We also think the PREPA board was smart not to pick from the ranks of its current restructuring advisers, such as FTI Consulting and Millco Advisors LP."
