Puerto Rico board reaches plan support deal with fuel line lenders

By Sarah Lizee

Olympia, Wash., Dec. 2 – The Commonwealth of Puerto Rico’s financial oversight board announced Thursday that it reached a plan support agreement with the holders of about $700 million in fuel line loans to the Puerto Rico Electric Power Authority (Prepa).

The commonwealth said this is a significant step towards a plan of adjustment for Prepa’s debt and an end to Prepa’s bankruptcy case under Title III of Promesa.

The agreement would reduce the fuel line lenders claim by 16% through newly issued Prepa bonds upon the effective date of a plan of adjustment.

“The fuel line lenders provided Prepa with critical funding to buy fuel and have come to the table as a separate creditor group to reach an affordable deal that will help resolve Prepa’s bankruptcy,” the board’s chairman, David Skeel, said in a news release.

“With the support of the fuel line lenders we will continue to negotiate with other creditors to reach a plan of adjustment that would allow Prepa to move on and continue to transform into a modern and reliable energy system.

“This is a big step towards getting Prepa out of bankruptcy.”

Principal and interest on the new bonds would be paid by a hybrid charge consisting of a flat connection fee and a volumetric charge that would be added to Prepa customers’ electricity bills.

The amount and structure of the hybrid charge have not been finalized and would be determined by the plan of adjustment.

The new bonds would carry 6% interest and be tax-exempt.

The principal to be paid on the bonds issued to the fuel line lenders would have priority over principal payments to be paid on other bonds to be issued under the plan described in the agreement.

In addition, fuel line lenders would receive $15 million in consummation costs and up to $11 million in reimbursement of professional fees.

As previously reported, the U.S. District Court for the District of Puerto Rico recently gave the board until Dec. 8 to file the plan.

The previous deadline to file a Prepa plan was Dec. 1, but a team of mediators including judges Shelley C. Chapman, Brendan L. Shannon and Robert R. Drain asked for the extension.

The commonwealth announced its Title III petition filing in the U.S. District Court for the District of Puerto Rico on May 3, 2017. The case number is 17-03283.

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