The island’s federally-appointed financial oversight board, which is managing Puerto Rico Electric Power Authority’s bankruptcy, struck the agreement with a new group of investors holding $2.4 billion of utility debt including BlackRock, Nuveen, Franklin Advisers, Taconic Capital Advisors and Whitebox Advisors. The deal aims to reduce combined claims of $10 billion down to about $2.5 billion of new bonds.
“We understand that the terms of the plan — which reflect the current realities — may be difficult to accept for some, but we still hope we can get more bondholders to join the agreement and that this will end Prepa’s bankruptcy once and for all,” David Skeel, chair of the oversight board, told reporters Friday.A Prepa bond with a 5% coupon and maturing in 2032 last traded on Aug. 17 at an average price of 37.
The deal is part of a debt-cutting proposal the oversight board filed to the court on Friday and is the last major piece of Puerto Rico debt that needs to be restructured. It includes a new monthly charge of $8.71, on average, for some residents to repay the new bonds. Many Puerto Ricans object to any kind of additional electricity fee as they already pay some of the highest rates in the US. The island’s Energy Bureau, an independent energy regulator, would need to approve any new fee.
BlackRock in May hired Paul, Weiss, Rifkind, Wharton & Garrison to help restructure certain bonds, according to court documents. Nuveen and the other firms joined with BlackRock earlier this month.