SAN JUAN (Reuters) - An agreement in principle between a bond insurer and the Puerto Rico Electric Power Authority (PREPA), disclosed in a late Tuesday court filing, moves a deal to restructure about $9 billion of the bankrupt utility’s debt closer to the finish line.
Assured Guaranty Corp is in the “final stages” of documenting and executing an agreement with PREPA and a group of bondholders, who reached a deal with the utility in July covering more than $3 billion of debt, according to a motion filed in U.S. District Court in Puerto Rico.
The so-called definitive restructuring support agreement (RSA) would cover about half of PREPA’s outstanding bonds.
“If finalized, the definitive RSA will provide PREPA and its creditors with a path toward restructuring billions of dollars in legacy debt and would facilitate PREPA’s transformation process and development of a plan of adjustment,” the filing stated.
A PREPA deal has lagged court-approved settlements with the bankrupt U.S. commonwealth’s Government Development Bank and Sales Tax Financing Corporation (COFINA) creditors. The island has been in federal court since May 2017 in an attempt to restructure about $120 billion of debt and pension obligations.
The latest motion in PREPA’s bankruptcy asks for a two-week extension in the schedule for litigation filed in October by Assured and two other bond insurers seeking a court-appointed receiver for PREPA. Assured contemplates withdrawing from the receiver lawsuit, which is currently set for a May 15 court hearing, if a settlement is approved, the filing said.
The other insurers, National Public Finance Guarantee Corp and Syncora Guarantee, have not reached a deal over the less than 15 percent of PREPA bonds they insure, according to the filing.
PREPA filed for bankruptcy in July 2017. Its financial and operational problems were compounded by Hurricane Maria, which slammed into the island that September, decimating an electric grid already struggling due to poor rate collection, heavy management turnover and lack of maintenance.
Meanwhile, the Puerto Rico government announced on Wednesday a new restructuring agreement with a group of bondholders of its Infrastructure Financing Authority, tackling Ports Authority bonds issued in 2011. The deal, which is pending approval from the island’s federally appointed financial oversight board, includes an investment component in the cargo and logistics operation of the San Juan Bay.
Reporting By Karen Pierog in Chicago and Luis Valentin Ortiz in San Juan; editing by Jonathan Oatis