IEEFA Update: Rejection of PREPA Debt Restructuring That Favored Bondholders Is a ‘Good Day’ for Puerto Rico
June 28, 2017 (IEEFA.org) — Analysts at the Institute for Energy Economics and Financial Analysis said today the decision on Monday by a federal oversight board to reject a creditor-friendly debt-restructuring deal for the Puerto Rico Power Authority (PREPA) was in the best interest of the U.S. commonwealth and its residents.
The supervisors of the Puerto Rico Oversight, Management, and Economic Stability Act voted 4-3 against a $9 billion debt-restructuring settlement that bondholders favored.
“PROMESA’s decision will give PREPA the time and resources needed to improve their planning, to reform their energy mix, allow the development of renewable energy, and to bring down electricity rates on the island,” said Tom Sanzillo, IEEFA’s director of finance. “The decision also injects an element of reality into the bond markets. Because the $9 billion PREPA debt deal was seen as the model for how the rest of Puerto Rico’s $72 billion in debt would be settled, this sets a course that will help the commonwealth’s larger fiscal problems.”
The PROMESA board voted after months of debate over how best to help PREPA and the Puerto Rican economy recover from years of debilitating debt growth. Advocates for reform of the electricity system in Puerto Rico include Puerto Rico Institute for Competitiveness and Sustainable Economy (ICSE-PR), El Puente Enlace Latino de Acción Climática, and Unión de Trabajadores de la Industria Eléctrica y Riego (UTIER), the union representing electrical workers at PREPA.
Sanzillo said, “Killing this deal is also almost certain to mean that other Puerto Rico agencies will pay fewer pennies on the dollar to bondholders, allowing the Puerto Rican people to avoid many years of crushing debt. In addition, there is now an opportunity to move from an overwhelmingly fossil fuel based electricity system to one based on clean sources of electricity.”
“The challenges faced by Puerto Rico are still enormous, both regarding energy and regarding the overall economy of the island. But today is a good day.”
IEEFA has issued a series of reports, testimonies, and commentaries advocating for reform of PREPA and for a serious reduction in PREPA’s debt levels to allow for those reforms to take place.
Related items:
IEEFA Puerto Rico: The PREPA Restructuring Plan Before Congress Is Not Realistic and Does Not Hold All Players Accountable
IEEFA Report: Debt Restructuring Deal for Puerto Rico Power Authority Will Not Restore Agency to Financial Health
Media contact: Karl Cates, [email protected], 917.439.8225
About IEEFA
The Cleveland-based Institute for Energy Economics and Financial Analysis (IEEFA) conducts research and analyses on financial and economic issues related to energy and the environment. The Institute’s mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.
