Puerto Rico Gov. Alejandro García-Padilla met with a group of unidentified advisors to the Commonwealth’s creditors to communicate, first hand, the need for Puerto Rico reach a broad restructuring of its $70 billion public debt to sustainable levels, his office said Tuesday.
At the meetings, the governor emphasized that Puerto Rico is only willing to accept agreements leading to “sustainable long-term restructuring that will result in economic growth for the island.” At the same time, he stressed the urgency of reaching an agreement to prevent deterioration of the island’s current situation.
“We cannot continue to go on with refinancing measures as proposed by some creditors and politicians. Puerto Rico cannot put itself back in this position in the near future, so the agreements reached must be final, sustainable and durable,” he said.
“The time to act is now. Continuing to wait could result in even worse economic and social consequences for the island. Emigration would continue and the recession could worsen, causing even the same creditors to recover a much lower percentage than projected,” said García-Padilla.
Attempts to obtain a list of the creditors represented in Tuesday’s talks were unsuccessful, with La Fortaleza saying their names would not be released at the request of the advisors who allegedly asked for confidentiality.
Meanwhile, the governor said that over the course of negotiations the government will continue giving priority to the provision of essential services to Puerto Ricans.
“Puerto Rico has been at the negotiating table continuously with creditors and meetings like this show the good faith of our administration in this process. We’re open to dialogue and will continue to focus all our efforts on the continuation of these negotiations,” said García-Padilla, who will travel to Washington, D.C. today, where lawmakers are drafting a bill that would create an oversight board for Puerto Rico, as well as establish a mechanism for an orderly restructuring of the debt.
PREPA enters financing stage with creditors ongoing
Meanwhile, the Puerto Rico Electric Power Authority announced Tuesday that the conditions required for creditors to fund the $111 million bond purchase under PREPA’s Restructuring Support Agreement (RSA) and related documents have been satisfied, and as a result such creditors are required to fund the $111 million bond purchase on May 12.
PREPA paid $111 million in interest to these creditors in January 2016 in reliance on the creditors’ agreement to relend the same amount if two important milestones in PREPA’s restructuring occurred: first, the enactment of the PREPA Revitalization Act (which occurred on February 16, 2016), and second, the filing of a petition with the Energy Commission seeking approval of the SPV Petition (which occurred on April 7, 2016), each in a form acceptable to the creditors.
Both milestones have been satisfied, and the bondholders are now required to fund the $111 million bond purchase on May 12, 2016, PREPA said in a statement.
On Monday, PREPA’s Bondholder Group announced an offer to pre-fund the purchase price of the 2016 Bonds that it agreed to purchase under the Bond Purchase Agreement to facilitate the completion of the RSA with PREPA.
Under the terms of the offer, the BPA deadline would be extended until the earlier of the passage of an amendment by the Puerto Rico legislature excluding PREPA as an RSA party from the Moratorium Act, or May 31, 2016.
The Bondholder Group said it is prepared to deposit the approximately $61 million to fund the BPA into escrow or other segregated accounts. Under the arrangement, the funds would be transferred to the PREPA bond trustee following the passage of legislation, which would address issues created by the Moratorium Act preventing the consummation of the BPA, and the satisfaction of other agreed-upon conditions precedent to the BPA.
“We continue to be supportive of PREPA and the Puerto Rico legislative process, which is why we are offering to remove a degree of risk and uncertainty by depositing this money up front,” said Stephen Spencer, financial advisor to the PREPA Bondholder Group.
“We’re willing to extend the time to consummate the BPA because we understand that additional time may be needed to pass the necessary legislation, and we are confident that extending through the end of the month provides that. We look forward to continuing to work with PREPA to complete the fair deal we have struck, which will benefit citizens in Puerto Rico and all PREPA stakeholders,” he said.