Bond Insurers Sue Puerto Rico Board to Enforce $9 Billion Utility Deal
June 27 2017 - 11:09AM
Dow Jones News
By Andrew Scurria
Bond insurers are suing Puerto Rico's financial oversight board
over a $9 billion utility debt-restructuring agreement, accusing
the U.S. territory's financial supervisors of improperly
withholding approval of the controversial deal.
Assured Guaranty Ltd. and MBIA Inc.'s National Public Finance
Guarantee Corp. on Monday night asked for a court order requiring
the federal oversight board to accept the existing debt agreement
covering the cash-strapped power monopoly known as Prepa. That
deal, three years in the making, has failed so far to gain
sufficient support among the oversight board's seven voting
members, leaving the agreement wobbling on the brink of collapse,
The Wall Street Journal reported this month.
The oversight board presented Prepa's creditors with a
counteroffer this week that would further revise those proposed
terms to obtain additional debt relief, according to a person
familiar with the matter.
Puerto Rico's central government and several agencies are under
court supervised restructuring proceedings in San Juan, but so far
the board hasn't invoked those same bankruptcy protections for the
electric utility. Whether the oversight board has authority to veto
the deal has generated controversy between the board, Prepa's
creditors and the members of Congress who wrote Puerto Rico's
federal rescue package. The insurers' lawsuit said the deal was
preordained by Congress under that law and can't be
"second-guessed" now by the board.
"The clock is ticking on Prepa's restructuring, and Puerto Rico
cannot afford to endure a Prepa bankruptcy that could turn the
lights off," the lawsuit said.
Bondholders under the existing deal would receive new debt worth
85% of their claims, paid from a new charge on utility customers.
Critics, which include local manufacturers, say the deal would
impose new costs on utility ratepayers to repay creditors that risk
stifling economic growth and crowding out private generation
projects. Without a settlement framework in place, Prepa could join
in the territorial government's court-supervised bankruptcy, where
a judge would decide who gets paid what.
Write to Andrew Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
June 27, 2017 10:54 ET (14:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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