SAN JUAN, Puerto Rico – Puerto Rico’s federally appointed fiscal oversight board announced Tuesday that it has proposed a $3 billion settlement aimed at resolving the long-running debt restructuring of the island’s public electric utility, marking its latest effort to conclude one of the final major chapters of Puerto Rico’s fiscal crisis.
The Financial Oversight and Management Board said the proposal would address more than $10 billion in debt tied to the Puerto Rico Electric Power Authority (PREPA), including about $8.5 billion in claims held by bondholders who have yet to reach an agreement.
Under the proposal, creditors would receive a combination of cash payments and newly issued bonds. The offer represents a $1.4 billion increase over the board’s previous proposal.
Decade-Long Restructuring Nears a Critical Stage
PREPA has spent nearly a decade attempting to restructure its debt after Puerto Rico declared in 2015 that it could no longer meet its obligations on more than $70 billion in public debt.
The financial crisis prompted the U.S. Congress to establish the Financial Oversight and Management Board in 2016. A year later, Puerto Rico filed what became the largest municipal bankruptcy proceeding in U.S. history.
Since then, negotiations between the oversight board and PREPA bondholders have repeatedly stalled despite multiple rounds of mediation.
Board Executive Director Robert F. Mujica Jr. said resolving the utility’s debt remains essential to Puerto Rico’s long-term economic recovery.
“Puerto Rico must be able to close this last chapter of its fiscal crisis and move forward,” Mujica said.
He added that completing the restructuring would help support reliable and affordable electricity while encouraging investment across the U.S. territory.
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Funding Source Remains Unclear
The oversight board said it has not yet determined how the proposed settlement would be financed.
The absence of a funding plan has raised concerns that any eventual agreement could increase electricity costs for consumers through higher utility rates.
Puerto Rico already has some of the highest electricity prices among U.S. jurisdictions, while residents and businesses continue to experience frequent power outages.
The board did not indicate whether electricity customers would ultimately bear any portion of the settlement costs.
Most Government Debt Restructuring Already Completed
Officials noted that previously negotiated agreements with several creditors and certain PREPA bondholders remain in effect.
According to the oversight board, it has completed 12 debt restructuring agreements involving Puerto Rico’s government, eliminating more than $55 billion in debt payments over the next 40 years.
Resolving PREPA’s remaining obligations would mark one of the final major financial restructurings stemming from Puerto Rico’s debt crisis.
This report is based on reporting by The Associated Press.
Article Topics: Puerto Rico | PREPA | Financial Oversight Board | Debt Restructuring | Municipal Bankruptcy | Public Finance | Energy | U.S. Territories
