In another step forward in a nearly two-year old negotiated restructuring process, Puerto Rico Electric Power Authority's creditors and insurers lent the utility $55 million.
PREPA said Friday it reached agreement with its supporting creditors on the sale of the first installment of $111 million in "relending" bonds under its Restructuring Support Agreement and related Bond Purchase Agreement.
The parties are negotiating agreements for the remaining sale of $55 million in relending bonds.
"This agreement with creditors demonstrates the continued commitment of PREPA to consummate the transactions laid out in the RSA," said Lisa Donahue, PREPA's chief restructuring officer said according to an authority release. "We are in the process of documenting the sale of the remaining $55 million in relending bonds."
Friday's announcement of the bond purchase follows several postponements.
On May 9 the PREPA bondholders expressed concerns that Puerto Rico's recently passed Moratorium Act could be used to declare a moratorium on payment of PREPA debt. However, Puerto Rico Gov. Alejandro García Padilla signed an executive order excluding the anticipated relending PREPA bonds from any freeze under the act, according to authority executive director Javier Quintana Méndez.
According to PREPA documents from Jan. 27, the purchasers were to be Assured Guaranty, National Public Finance Guarantee, Oppenheimer Funds, Marathon Asset Management, Knighthead Capital Management, Goldman Sachs Asset Management, Franklin Advisors, BlueMountain Capital Management, and Angelo, Gordon & Co.
The purchasers were to purchase $55 million when Puerto Rico's government passed acceptable legislation reforming PREPA. They were to purchase the additional $55 million when the authority had petitioned the Puerto Rico Energy Commission for a securitization charge on electric bills that satisfied the Restructuring Support Agreement. Both these events have happened.
Based on Bond Purchase Agreement terms disclosed in February, the bonds are to mature serially and bear a 10% annual interest rate. Interest is to be paid every six months and the bonds are to have a final maturity on July 1, 2019.
PREPA, which disclosed its financial crisis in mid-2014, negotiated a deal with a group of bondholders that includes a 15% reduction on their principal. The authority and its creditors are in the process of taking steps toward consummating this deal.
