Puerto Rico on Wednesday continued to suffer the aftereffects of Hurricane Maria, as the power authority said it may take more than six months to restore electricity and a published report said the Oversight Board was ready to revise the amount of debt to be paid in the next nine years.
Puerto Rico Electric Power Authority executive director Ricardo Ramos Rodríguez said that the authority would try to complete the job in less than six months. He noted that it took six months for the authority to completely restore electrical service after Hurricane Hugo hit the island in 1989.
Hugo mainly affected the eastern end of Puerto Rico whereas Maria slammed the entire island.
Also on Wednesday, The Wall Street Journal reported that the Puerto Rico Oversight Board was planning on meeting on Friday to revise the March-approved fiscal plan.
According to the Puerto Rico Oversight, Management, and Economic Stability Act the fiscal plan will guide Puerto Rico government spending and revenue through fiscal year 2026. By dictating these things, it also indicates how much money is to be available for debt service in this period. The existing fiscal plan specifies there should be enough money to pay about 24% of the debt due during the period.
Sources with the board and the Puerto Rico Fiscal Agency and Financial Advisory Authority didn’t confirm the Journal story by Wednesday afternoon.
“The challenges are immense,” said Antonio Fernós Sagebién, managing director of REOF Capital, a Puerto Rico-based investment firm. “The Oversight Board should revise every fiscal plan as the all underlying assumptions no longer hold. The OB needs to set itself aside for the time being and allow the Federal Emergency Management Agency and the local executive branch to do the job.
“Now more than ever we need the federal monetary agencies to work with Puerto Rico,” said Fernós Sagebién. “In particular, U.S. Treasury needs to approve a massive restructuring deal (á la Brady bonds) immediately with our bondholders. We can't have money spent on corporate lawyers and PowerPoint producing technocrats while funding is needed for immediate reconstruction efforts.”
Rafael Hernández Montañez, a member of Puerto Rico's House, said Maria put Puerto Rico’s territory-wide and municipal governments in very difficult financial situations. While FEMA has committed to paying for 100% of the costs of some work, it is still requiring a government match of 20% to 25% of the costs for other work.
“It’s going to be a huge effort to cover that 20% with the government’s unbalanced budget,” he said.
Maria will also lead to reduced revenues for the local governments, Hernández Montañez said.
Some members of Congress were complaining about the Trump administration’s response to the hurricane that hit Puerto Rico on Sept. 20.
On Wednesday 145 U.S. representatives and senators signed a letter urging President Trump to appoint a senior general to oversee the military’s aid to the island, to deploy the USS Abraham Lincoln aircraft carrier, and to increase personnel to assist local law enforcement.
“While the situation on the ground remains desperate, President Trump held a press conference yesterday congratulating his administration on their response,” said U.S. Rep. Nydia Velázquez, D.-N.Y. “If President Trump doesn’t swiftly deploy every available resource that our country has, then he has failed the people of Puerto Rico – and this will become his Katrina.”
Hurricane Katrina led to the wide-scale damage of New Orleans and nearby communities and the deaths of between 1200 and 1850. It is the costliest hurricane in U.S. history. Critics said President George W. Bush’s response was inadequate and contributed to the disaster’s aftermath.
On Wednesday morning the PREPA Bondholders Group offered up to $1.85 billion in debtor in possession loans to the authority. According to the group, part of the package would be a new money loan of up to $1 billion. Another part would be their possible acceptance of an $850 million in DIP notes in exchange for $1 billion in outstanding bonds owed to them.
“The new funding would allow PREPA to provide the required matching funds under various grants from the Federal Emergency Management Agency,” the group said in a press statement.
“We welcome and appreciate the expression of support from creditors,” Natalie Jaresko, the Board’s executive director, said in a statement. “The Board will carefully consider all proposals in coordination with the government, but it is still very early as we begin to navigate a way forward following the catastrophic impact Hurricane Maria had on the Island.”