Puerto Rico bondholders say utility damage has been overstated

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The damage to Puerto Rico’s electric company from Hurricane Maria has been overstated, a group of bondholders said in a U.S. court filing as they asked the U.S. judge overseeing its bankruptcy to block a federal board’s appointment of a executive to manage the utility.

The bondholder group’s consultant estimated it will cost less than $1 billion to repair the power grid, compared with initial reports of about $5 billion. Since the September storm, Puerto Rico has struggled to get electricity restored, with more than half of the island still without power.

The damage to the utility has threatened to impose deeper losses on bondholders, given the costs for reconstruction and the revenue lost during the prolonged outage. The utility’s bonds that mature in 2042 traded for an average of 37 cents on the dollar Friday, down from about 50 cents before the hurricane.

"While Hurricane Maria undeniably inflicted substantial damage, ample evidence demonstrates that the vast majority of the assets of the PREPA generation, transmission, and distribution system are substantially intact and could be restored expeditiously if appropriate and competent measures were implemented," the group said in the filing.

Emails requesting comment from Prepa representatives Odalys de Jesus and Carlos Monroig were not immediately returned.

The group is contesting a federal oversight board’s appointment of a chief transformation officer, Noel Zamot, to oversee the electric utility, saying the panel exceeded its authority. The board took that step after scrutiny of a $300 million rebuilding contract that was awarded to a tiny Montana company. Officials have since said the deal is being canceled.

PA Consulting Group, an expert witness for the bondholders, estimated that about 85 percent of the island’s electric grid was intact, despite some estimates that about that much of it was destroyed.

The case is re: Puerto Rico Electric Power Authority, 17-4780, U.S. Bankruptcy Court, District of Puerto Rico (San Juan).

Bloomberg News
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