Puerto Rico House May Kill PREPA Restructuring Deal

After surmounting numerous hurdles over the last 20 months, a deal to restructure the debt of the Puerto Rico Electric Power Authority may fall apart due to a lack of Puerto Rico legislative support.

Since September the creditor deal has included a requirement that the government pass legislation reform the island's energy sector.

On Wednesday Puerto Rico's Senate approved an energy sector reform bill that the creditors supported.

On Thursday the entire Puerto Rico House of Representatives took up discussion of the measure. However, Puerto Rico House President Jaime Perell- Borás ended the session without a vote when it became apparent the bill lacked the votes for passage.

Perell- Borás is a member of the Popular Democratic Party with Puerto Rico Gov. Alejandro García Padilla. From 2013 to this January the PDP had 28 members in the House and the opposition New Progressive Party had 23 members. In January PDP Rep. Nelson Torres Yordán resigned his seat to become mayor of Guayanilla.

The PDP has the right to replace Torres Yordán and plans to do so by Monday, according to a source in the House. It aims to quickly replace him to gain an additional vote for the energy sector bill.

However, the replacement may not be enough. On Wednesday House Minority Leader Jenniffer González Col-n said none of the NPP legislators would vote for the bill.

There are reports that up to five PPD members of the House have concerns about the bill and may vote against it. Rep. Carlos Bianchi Angler- is a member of the PPD and works for the Puerto Rico Electric Power Authority. He has said that he will recuse himself.

If the PDP is able to appoint a member to replace Torres Yordán by Monday, it would be able to lose only one vote beyond that of Bianchi Angler- and still have the 26 votes needed to pass the bill. This assumes all PNP members vote against it.

There are reports that PDP members Luisa Gándara Menéndez, Javier Aponte Dalmau, Luis Ortiz Lugo, Luis Vega Ramos, and Manuel Natal Albelo have concerns about the bill and may vote against it.

PREPA's creditors have set a deadline of the end of Tuesday, Feb. 16 to pass energy sector reform legislation acceptable to them. However, the creditors have a history of extending their deadlines.

According to Gov. García Padilla, the "bill paves the way for over $2 billion in capital investments to our current electricity infrastructure, significantly reduces its debt stock, modernizes operations, de-politicizes [PREPA] governance, improves client service efforts, and promotes a safer work environment for our public employees."

PREPA owes about $8.4 billion in bond debt. Any restructuring or monetary default on the debt would be the largest default in United States municipal bond history.

Vega Ramos and Natal Albelo were among the first three members of the House to openly call, in March 2015, for a restructuring of Puerto Rico's debt.

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