Puerto Rico Approves Electric Utility Restructuring Bill

  • Governor Alejandro Garcia Padilla signed bill into law
  • Restructuring agreement with creditors was set to expire

Puerto Rico lawmakers have approved legislation to allow the island’s main electric utility to restructure almost $9 billion of debt, a key step in the commonwealth’s efforts to resolve its fiscal crisis.

The legislation authorizing a mechanism to restructure the Puerto Rico Electric Power Authority’sdebt was signed late last night by Governor Alejandro Garcia Padilla after being passed by the House of Representatives and Senate, according to the governor’s spokesman. A debt-reduction agreement between the agency known as Prepa and its creditors was set to expire Tuesday absent passage of the bill. The House of Representatives passed it Monday and sent it back to the Senate for final concurrence. 

The legislation will allow the utility to cut its obligations in a debt exchange where bondholders accept a 15 percent loss on their securities. Savings on principal and interest payments would enable the agency to rehabilitate facilities to burn more natural gas and decrease its reliance on crude oil to produce electricity.

Without a restructuring, Prepa is unable to pay creditor bills due July 1, Lisa Donahue, the utility’s chief restructuring officer, told a U.S. House Natural Resources Committee last month.

Separately, Puerto Rico released a draft version of its financial statements for 2014 that showed a net deficit of $49.2 billion. The audited financial statements for fiscal 2014 won’t be ready until at least the end of March. U.S. Congressional leaders have been critical of the lack of current financial information while Puerto Rico sought access to bankruptcy.

(An earlier version of this story was corrected to remove a reference to the Senate being adjourned.)

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