Bond parties opposed to PREPA deal offer fresh capital

Bond parties opposed to the Puerto Rico Oversight Board's proposed Puerto Rico Electric Power Authority bankruptcy settlement have offered to invest fresh capital into the authority as part of a bankruptcy settlement.

The parties made the offer in a written submission to the U.S. House Committee on Natural Resources Subcommittee on Indian and Insular Affairs, which held a hearing on Puerto Rico's electrical grid and its need for reliable energy last week.

While a group of firms led by BlackRock (BLK) already agreed to invest new capital in a deal they reached with the board in August 2023, this is the first time groups opposed to the board's bankruptcy offering have offered new capital.

Assured Guaranty (AGO), GoldenTree Asset Management, National Public Finance Guarantee Corp. and Syncora Guarantee made the offer in the written submission, without specifying an amount or say which members would be willing to provide money.

"PREPA's well-documented failure to reliably deliver electricity to the people of Puerto Rico is a direct consequence of the inability or unwillingness of the [Oversight Board] to bring PREPA's Title III bankruptcy case, which now stands at seven years and counting, to a reasonable consensual solution, as intended by Congress when it passed PROMESA," the opposing bondholder group said.

"Access to the capital markets is vital to PREPA's ability to operate reliably and to fulfill consumer needs," they wrote. "We are convinced that, without such access, PREPA's performance will only continue to deteriorate, endangering Puerto Rico's economic recovery."

The group claimed it seeks only a reasonable settlement on PREPA's bond debt but the board has wasted hundreds of millions of dollars on lawyer and advisor fees "fighting an ill-conceived and unsuccessful war of attrition."

"A group of non-settling bondholders continues to refuse to accept that PREPA cannot repay its current debt at the level they claim," the Oversight Board said. "The Oversight Board will continue its path to a responsible debt restructuring that will end PREPA's bankruptcy with significantly reduced debt and provide PREPA with the critical resources to make the investments necessary to give Puerto Rico reliable electricity."

Meanwhile, PREPA parties await the First Circuit Court of Appeals' decision whether to rehear its June ruling that the bond parties had a lien on the authority's net revenues.

The last substantive filing in that case was on Aug. 9 and the next step is for the judges to say yes or no to an oral hearing.

The BlackRock (BLK) group settlement deal expires on Tuesday. It remains to be seen whether the group's members will choose to extend it.