Puerto Rico Gov. Ricardo Rosselló announced that the Fiscal Agency and Financial Advisory Authority acting on behalf of the Puerto Rico Electric Power Authority has reached an agreement in principle regarding an enhancement of the terms of the restructuring support agreement with the Ad Hoc Group of PREPA bondholders, its fuel line lenders, the monoline insurers and the Government Development Bank for Puerto Rico.
The RSA has been extended to April 13, 2017 to allow for documentation of the additional terms. The enhancements to the RSA are being reviewed but have not yet been approved by the PROMESA Oversight Board, the government said..
The administration estimates that the enhancements to the RSA will achieve $2.2 billion in debt service savings for the period of 2018 through 2022 as compared to the contractual terms of the debt.
These savings represent $1.5 billion additional savings versus the existing terms of the RSA.
The changes also are designed to allow PREPA to take the steps necessary to modernize its operations and implement the Administration’s energy policy, including attracting new private investment and P3 programs.
The administration estimates that the enhanced RSA will result in individual ratepayer transition charge savings of 36 percent for the period 2018 through 2022, representing a reduction of the average household annual electricity bill by approximately $90 per year over the next five years.
“The enhancements to the RSA were the result of good faith negotiations by my team and PREPA’s major creditors. I believe that the negotiated terms represent fair additional contributions by all parties to the RSA and will set PREPA on a path toward becoming a modern utility that will provide reliable power at sustainable rates to the people of Puerto Rico,” said Rosselló.
Upon taking office, Rosselló instructed his team to evaluate the RSA and negotiate enhancements that would meet the needs of PREPA. Those negotiations resulted in the agreement in principle announced today.
Elías Sánchez, the governor’s representative to the PROMESA Oversight Board, said the administration was “pleased with the outcome of the negotiations and viewed it as a positive step toward implementation of the PREPA restructuring and Puerto Rico’s fiscal plan.”
“This transaction is the result of good faith negotiations conducted between the government and the creditors, consistent with the Administration’s policy of reaching consensual agreements,” said Sánchez.
“On behalf of AAFAF and the administration, I want to express my appreciation to the team and PREPA’s creditors. I believe the transaction represents the first step in the comprehensive restructuring of Puerto Rico’s debt,” added Gerardo Portela Franco, the AAFAF Executive Director.
AAFAF was assisted in the negotiations by Rothschild & Co., as financial advisor, Bank of America Merill Lynch as investment banker, and Greenberg Traurig LLP as legal advisor.
A few weeks ago, the Governor visited Washington to participate in the audience of the Natural Resources Committee, to establish the need of reviewing the RSA of PREPA, given than the previous agreement substantially increased the energy costs in the island.
Meanwhile, the Ad Hoc Puerto Rico Electric Power Authority (PREPA) Bondholder Group issued a statement regarding the revised economic terms of PREPA’s existing restructuring support agreement, following the governor’s announcement.
“We are pleased to have been able to reach this agreement with the Financial Advisory Authority and the Rosselló administration, which we believe represents a fair solution for all parties,” the group said in the statement.
“We have worked for nearly three years to support PREPA and the completion of the RSA agreement, and we are confident that this outcome is in the best interest of Puerto Rico, its people and the future of PREPA as a sustainable utility.”
“The bondholders would like to thank FAFAA and the governor for understanding the urgency of this situation and coming to the table to negotiate in good faith with PREPA’s creditors. We are hopeful that once completed the PREPA deal will help the commonwealth in its recovery, as well as in its path to regaining access to the capital markets,” the creditors said.