Puerto Rico: Attempt To Restructure PREPA Debt Fails

SAN JUAN (AP) — Efforts to restructure about $9 billion in debt at the Puerto Rican power company hit a new stumbling block Thursday after several failed attempts to end its bankruptcy.

Officials had until Thursday to present a new proposal to reduce the debt of the Puerto Rico Electric Power Authority (PREPA) — the largest for a government agency on the island — but a mediation team that oversees the negotiations between bondholders and the government called for a seven-day extension.

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Federal Judge Laura Taylor-Swain, who is overseeing the case, approved the extension request, saying it was sensible and necessary.

Resolving the power company’s debt is seen as crucial to Puerto Rico’s economic development as the island continues to be mired in a deep economic slump and investors are kept at bay by financial uncertainty and chronic blackouts that are partly blamed to the wear and tear on the infrastructure caused by decades of neglect and mismanagement.

A few months ago, Puerto Rico left behind the largest municipal bankruptcy in US history. The island had announced in 2015 that it could not pay its public debt of more than 70,000 million dollars, the product of decades of corruption, mismanagement and requests for large loans. The electricity company is the only public body that has not restructured its debt. Many on the island fear that the ongoing negotiations will lead to an increase in already high electricity rates to finance payments to creditors.

In a document filed with the court on Thursday, the mediation team noted that the federal control board that oversees Puerto Rico’s finances and represents the island’s government in the bankruptcy lawsuit has failed to present data and analysis relevant to the current negotiations on the debt of the electricity company.

The team said that without that information, there was no way to move toward a consensual resolution.

“Put another way, good faith negotiations…require transparency from both parties,” the document says.

The board said in a statement sent to The Associated Press that it has cooperated and will continue to do so.

The mediation team noted that the board agreed to provide all requested information on Friday and would be available for questions. He added that he was reluctant to request the extension, but forcing the watchdog to submit a restructuring proposal on Thursday would not have been conducive to a consensual resolution.

The request comes after the federal judge presiding over the case ordered a new round of negotiations in late September after the control board and bondholders reached an impasse. The judge also asked the watchdog to determine the amount that bondholders should receive.

The governor of Puerto Rico Pedro Pierluisi announced last March that his government would reject a proposed debt restructuring agreement for the electric company in which he had worked for years, assuring that it was not feasible or in the interests of the island.

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