First agreement reached on Puerto Rico's electric utility debt

San Juan, Dec. 2 - The Puerto Rico Fiscal Oversight Board (FOSB) reached an agreement with the holders of approximately $700 million in loans to the state-owned Puerto Rico Electric Power Authority (PREPA) for fuel lines.

It is "a significant step toward a Plan of Adjustment for PREPA's debt and toward the end of the bankruptcy case" of this entity, according to the statement from the JSF, created by the U.S. Congress to restructure the island's multi-billion dollar public debt.

The agreement would reduce the fuel line lenders' claim by 16% through new bonds issued by PREPA, whose debt amounts to $9 billion, on the effective date of a Plan of Adjustment.

"The Fuel Line lenders provided PREPA with critical funds to purchase fuel and have come to the table as a separate creditor group to reach an affordable agreement to help resolve PREPA's bankruptcy," said David Skeel, president of the JSF.

"With the support of the Fuel Line lenders, we will continue to negotiate with other creditors to arrive at a plan of adjustment that will allow PREPA to move forward and continue the transformation to a modern, reliable power system," he said.

Principal and interest on the new bonds will be paid through a hybrid charge consisting of a fixed connection fee and a charge based on energy consumption that will be added to PREPA customers' electricity bills.

Prior to this announcement, PREPA's debt restructuring mediation group filed a legal motion requesting an additional week to submit the Plan of Adjustment document, which should have been delivered yesterday to the federal court handling the case.

Last September, the JSF and the Government of Puerto Rico announced that a "stalemate" had been reached in the mediation with Prepa's creditors when negotiations failed to bear fruit.

The process to restructure PREPA's debt has been long and slow, since the Government of Puerto Rico filed for bankruptcy in 2016.

Last January, a plan was approved to restructure about 80% of the island's central government debt, which was reduced from $33 billion to $7.3 billion.