The restructuring of more than $8 billion of Puerto Rico Electric Power Authority debt took another step forward Monday when bond insurers National Public Finance Guarantee and Syncora Guarantee said they support it.
“Following the restructuring of the COFINA transaction earlier this year, we’ve moved another step closer to resolving all of National’s Puerto Rico exposure by joining the RSA that provides a blueprint for the restructuring of our insured PREPA bonds” said Bill Fallon, CEO of National Public Finance Guarantee Corp. He referred to the Puerto Rico Sales Tax Financing Corp.'s bond restructuring approved in early February.
“We look forward to working cooperatively with the government of Puerto Rico, the Oversight Board and other creditors on the closing of this transaction, and to restructuring our remaining exposure to the island,” Fallon said.
In May Assured Guaranty announced that it was supporting the Restructuring Support Agreement, which defines the bond restructuring terms.
The effort to restructure PREPA's debt dates back to July 2014 when when the utility was forced to draw on its debt service reserve -- foreshadowing the territory's descent into the biggest municipal bankruptcy.
According to the Puerto Rico Oversight Board formed in 2016, the agreement now has been formally supported by the holders of about 90% of all uninsured bonds and all PREPA bond insurers. Normally, the agreement would need to be supported by at least two thirds of all voters in each bondholder class and by at least half of all those eligible to vote in the class.
To go forward, Puerto Rico Title III bankruptcy Judge Laura Taylor Swain would also have to approve the deal and the approval would have to survive any appeals.
“The addition of Syncora and National to the RSA provides significant certainty to the restructuring not only of PREPA’s bonds, but to the transformation of PREPA to a modern, efficient power utility able to deliver clean, reliable and affordable energy to the people and businesses of Puerto Rico,” the board said in a written statement.
The board said the agreement with National and Syncora doesn’t change the “economic terms.” According to these terms, bondholders would exchange outstanding PREPA debt for two new classes of bonds. Tranche A, which is expected to mature in 40 years, would be exchanged at 67.5 cents on the dollar of existing bonds. A second group of Tranche B “growth” bonds, which would be tied to the economic recovery of Puerto Rico and mature in 45 years, would be exchanged for 10 cents on the dollar of existing bonds.
As with the deal for Assured, National and Syncora will be able to choose among have several options to deal with their exposure to PREPA bonds.
In other PREPA news, in the last few days there have been an increasing number of calls in Puerto Rico for the dismissal of PREPA’s executive director, José Ortiz, and for investigations of the authority’s contracts. On Sunday Puerto Rico House Rep. Luis Raúl Torres and Javier Aponte Dalmau held a press conference calling for these things.
They complained that under Ortiz, PREPA has approved contracts without Energy Bureau approval.
Aponte Dalmau said that Ortiz had improperly hired José Pérez Canabal as a vice president. They say that Pérez Canabal has a conflict of interest and that it is Ortiz’s responsibility to do what Canabal has been hired to do.
On Friday Puerto Rico Senate Minority Leader Eduardo Bhatia filed a resolution in the Senate to investigate the work done by companies and consultants for PREPA.
On Monday the leader of PREPA’s association of retirees and the leader of PREPA’s main union also called for Ortiz to be dismissed.
