Puerto Rico’s bankrupt power utility reached a tentative agreement with a “substantial number” of its bondholders, according to a federal oversight board, and received another week to finalize a potential deal to reduce nearly $9 billion of debt.
(Bloomberg) — Puerto Rico’s bankrupt power utility reached a tentative agreement with a “substantial number” of its bondholders, according to a federal oversight board, and received another week to finalize a potential deal to reduce nearly $9 billion of debt.
US District Court Judge Laura Taylor Swain on Thursday granted a request by the federally appointed board to postpone to Aug. 18 a deadline to file an amended debt-cutting plan. The board, which manages the bankruptcy, and some bondholders are working on the specific terms of a restructuring support agreement, according to the board’s motion seeking an extension.
A potential debt deal between Puerto Rico’s Electric Power Authority, called Prepa, and its creditors would be a long-awaited and positive development in the utility’s six-year bankruptcy, which has been prolonged by hurricanes, the commonwealth’s own debt restructuring and the pandemic.
“The oversight board is pleased to report it has reached an agreement in principle with a substantial number of holders of Prepa bonds to settle their respective claims against Prepa,” lawyers for the board wrote in Thursday’s court filing.
Not all investors are on board yet. GoldenTree Asset Management says it hasn’t been invited to or participated in any settlement discussions, according to a statement it filed Thursday to the court following Swain’s approval of the Aug. 18 deadline. GoldenTree held $1 billion of Prepa debt as of Feb. 16, according to its most recent disclosure filing to the court.
“We believe that the efforts of the oversight board to cause the debtor to try to walk away from $8.4 billion of revenue bonds on a nonconsensual basis, and to buy plan support from some, but not all bondholders, through improper classification and disparate treatment, is wasteful and will not result in the timely or efficient conclusion of this process that all purport to desire,” lawyers for GoldenTree wrote in its filing Thursday.
GoldenTree has been part of an ad hoc group of Prepa bondholders, but it recently hired White & Case to represent it, an indication that the firm’s strategy may differ from the other investors in the group.
Negotiations between the oversight board and bondholders increased after Swain in June limited to $2.38 billion the amount of utility net revenue that bondholders have a claim to. That amount is a sliver of Prepa’s outstanding bonds.
Swain originally asked the board to submit its amended debt plan by July 14. She has postponed that deadline as the board has claimed that it continues to find agreement with creditors.
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