Puerto Rico Electric Power Authority bonds were slashed to D Thursday by Fitch Ratings in the wake of the utility’s bankruptcy filing.

PREPA's Costa Sur power plant in Guayanilla, Puerto Rico.
PREPA's Costa Sur power plant in Guayanilla, Puerto Rico.

PREPA’s long-term issuer default rating and power revenue bonds were downgraded to Fitch’s lowest level after the authority initiated Title III bankruptcy proceedings on July 2 under the Puerto Rico Oversight Management, and Economic Stability Act of 2016. The utility, which has $9 billion in outstanding debt, also failed to pay principal and interest due on the revenue bonds on July 3, according to Fitch.

“PREPA had previously disclosed a restructuring plan and related support agreement that anticipated the reduction of existing debt by means of a proposed distressed debt exchange but could have resulted in the continuing performance of certain securities,” said Fitch analyst Dennis Pidherny in the July 6 report. “However, the plan and support agreement were effectively terminated following a vote on June 29, 2017 by the Financial Oversight and Management Board appointed under PROMESA not to certify the agreement as eligible for debt modification procedures under Title VI of PROMESA.”

The PREPA press office did not immediately respond for comment on the downgrade.

The Puerto Rico Oversight Board approved sending PREPA into the Title III bankruptcy process last week in conjunction with accepting a consolidated budget that includes $913 million of debt service for the 2018 fiscal year. PREPA officials said after the filing that the authority will continue pursuing financial and operational restructuring within the Title III case.

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