The Puerto Rico Electric Power Authority extended a restructuring agreement with creditors until March 31.
The Restructuring Support Agreement was to elapse on midnight of Wednesday or Thursday. PREPA announced the extension of the deadline in a statement on Thursday morning.
The new agreement includes "a new milestone date of January 31, 2017 for PREPA and the RSA creditors to reach agreement on revisions to allow for implementation under [the Puerto Rico Oversight, Management, and Economic Stability Act] of another mutually agreed mechanism," according to PREPA.
A source close to the bondholders said there was a practical hurdle for the restructuring process on Jan. 31 but that if it was overcome the RSA would continue until March 31.
"Today's actions show the forward momentum of PREPA's transformation and the willingness of all parties to work together," said Luis Benítez, chairman of PREPA's governing board. "Our management and employees remain focused on the restructuring work streams along with the [Chief Restructuring Officer] team, which will ultimately provide the people of Puerto Rico with a self-sustaining utility that provides clean, safe electricity to its customers."
Lisa Donahue is working as PREPA's chief restructuring officer with others from Alix Partners.
PREPA and its creditors have been moving toward a comprehensive restructuring of its more than $8.4 billion in debt since the summer of 2014. It is currently involved in defending several lawsuits against both the tentative deal with creditors and the legislation that the Puerto Rico government passed for the energy sector in early 2016.
On Thursday the PREPA Forbearing Bondholders released a statement saying that they "believe that the extension of the RSA is a positive step and believe that it will ultimately lead to the implementation of the PREPA deal by mid-2017. To date, PREPA's creditors have supported PREPA with more than a billion dollars of incremental financial support – at a time when PREPA has no access to financial markets – and allowed PREPA to pass along nearly $2 billion of fuel cost savings to customers. Furthermore, in this RSA extension creditors have agreed to forgo reimbursement of substantial deal-related expenses pending an agreement on or before January 31 that will set forth the path to near-term execution of the PREPA deal."
The bondholders continue, "Unfortunately, the delays in consummating the PREPA deal (including the non-consolidation of validation proceedings for the new bonds) have led to significant additional expense and risk for PREPA ratepayers and creditors alike. This risk is furthered by the rising interest rate environment announced yesterday by the Federal Reserve Bank."
