After 13 months of suggesting it may have to change the debt restructuring deal for the Puerto Rico Electric Power Authority, the Puerto Rico Oversight Board officially threw its support behind the deal in court filings Tuesday.
The board also filed a new amended plan of adjustment and proposed disclosure statement on terms from the already announced deals for Employees Retirement System, Highways and Transportation, and Convention Center District Authority bonds. The board had reached those deals with bondholders and bond insurers since the board released the last version of these documents.
The board, Puerto Rico’s Fiscal Agency and Financial Advisory Authority, and PREPA made a statement on PREPA deal in a status report to the judge in the PREPA bankruptcy filed Tuesday evening, addressing the debt deal, called a Restructuring Support Agreement, reached the second half of 2018.
The board, Puerto Rico’s Fiscal Agency and Financial Advisory Authority, and PREPA are “supportive of the terms of the RSA. The Oversight Board members have publicly voiced their continued support for the RSA. The government parties intend to preserve the RSA by evaluating different means of implementation in light of the continuing challenges Puerto Rico is facing from the COVID-19 pandemic and changing economic and political landscape,” attorneys for the board, FAFAA, and PREPA told the court.
On March 27, 2020 attorneys representing the same parties told the court, “The spread of COVID-19 and the economic effects therefrom, including from the closure of all non-essential businesses on Puerto Rico, cannot be calculated at this time and the attention of the Government of the Commonwealth of Puerto Rico is dedicated to addressing the pandemic…. In the meantime, PREPA’s collections have been negatively impacted as a result of the consequences of the certain measures taken to address the virus.”
On Dec. 9, 2020 the parties’ attorneys told the court, “Evaluation of the RSA continues and the 9019 motion [to approve it] remains pending as the government parties seek to preserve the largely consensual posture of the case by evaluating the RSA in light of the changing economic landscape to determine whether the RSA needs to be renegotiated and, if so, how.”
In the PREPA RSA bondholders would exchange outstanding PREPA debt for two new classes of new securitization 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.
Parties to the new central government plan of adjustment and disclosure statement for thegovernment debt deals have a right to challenge the documents and call for their revision. Puerto Rico bankruptcy Judge Laura Taylor Swain has set July 13 for the hearing on the proposed disclosure statement.
Additionally, bond insurers Assured Guaranty and National Public Finance Guarantee filed a motion with the court on Tuesday night, asking it to keep a stay on matters affecting its revenue bond motions. It noted that it has reached a deal with the board on its HTA and CCDA revenue bonds and that if this deal goes forward to completion, the court should keep a stay on the insurers’ litigation on these matters.
Bond insurers Ambac and Financial Guaranty Insurance Company and some bond trustees have been litigating the revenue bond issues along with Assured and NPFG. They may wish to continue the litigation.
In October Ambac’s attorneys brought up concerns about the revenue bond litigation, the priority of the general obligation bonds, pension cuts, financial projections, fiscal plans, and financial transparency. On Tuesday night Puerto Rico Clearinghouse Principal Cate Long tweeted, “Unless the Puerto Rico Oversight Board reaches a deal with Ambac and FGIC expect all these issues to be litigated for [the] plan of adjustment.”
