SAN JUAN, Jan 29 (Reuters) - An agreement to restructure more than $8 billion of bonds issued by Puerto Rico’s bankrupt electric utility needs more time to obtain approval from the U.S. commonwealth’s legislative body, a lawyer for the island’s federally created financial oversight board said on Wednesday.
Martin Bienenstock told U.S. District Court Judge Laura Taylor Swain that the board is seeking another postponement, this time for a March 31 hearing on the deal, although lawyers for two bond insurance companies said they would oppose the delay. A board representative said the panel “wants to ensure the legislature has sufficient time to consider and pass” legislation needed to implement the agreement.
The court hearing will take up a restructuring support agreement (RSA) reached with a majority of creditors in September that moved the Puerto Rico Electric Power Authority (PREPA) closer to exiting a form of bankruptcy filed in July 2017.
The deal would reduce PREPA’s debt by up to 32.5%, but its imposition of higher charges on the utility’s customers has sparked concerns in the legislature. While Bienenstock said the board remains “hopeful that legislation would be submitted within the next weeks,” he warned “it is not exact science” when and if the island’s lawmakers would approve the deal.
Bienenstock also said the oversight board is reviewing a request by 13 members of Congress to renegotiate the PREPA RSA in the wake of a series of earthquakes that shook the island since late December.
The quakes included one with a magnitude of 6.4 on Jan. 7, the Caribbean island’s most powerful earthquake in 102 years. A power plant on Puerto Rico’s southern coast suffered severe damages and remains shut ever since, limiting energy production on the island. Luis Marini, who represents Puerto Rico’s fiscal agency, told the court a request for proposals will be issued next month to obtain 500 megawatts of temporary power. Preliminary assessments pegged damages at at least $460 million, while more than half of schools still remain closed, according to Marini. Meanwhile, a proposal to restructure $35 billion of core government bonds and claims and more than $50 billion of pension liabilities remains on course, despite the most recent events, Bienenstock said.
Bienenstock said mediation with creditors over a so-called plan of adjustment the board announced on Sept. 27 “is very much in progress” and that movement in those talks could be announced next month. (Reporting by Luis Valentin Ortiz in San Juan Additional reporting by Karen Pierog in Chicago Editing by Matthew Lewis)