PRASA to start seeking external financing in mid-August
Puerto Rico Aqueduct and Sewer Authority Executive Director Alberto Lázaro confirmed Thursday the agency is waiting for the governor to sign the law that will allow it to pursue external financing to begin talking to creditors next month.
Once the PRASA Revitalization Act is signed, the public corporation will have the leverage it needs to approach potential creditors for some $900 million in new funding to cover infrastructure improvements, payments due to contractors and other expenses, Lázaro said, during the monthly luncheon sponsored by the Associated General Contractors.
“The Legislature sent the bill to the governor and we hope there aren’t any problems with signing it. We sent a formal letter expressing our support for the bill to be signed into law,” he said.
The bill establishes that PRASA can seek new money to cover obligations related to its Capital Improvement Plan, which requires some $500 million in investments through next year, $150 million due contractors, and future bond emission costs.
The PRASA Revitalization Act would allow the utility to also negotiate a bond exchange of up to $1.1 billion to improve the terms attached to its current debt with new securitization bonds. The $900 million interim financing could also eventually be converted into securitization bonds, which “should provide certainty to investors,” Lázaro said.
“This is the tool and the opportunity we need to go to market. At this time, we don’t have to talk about water rate increases. But we also don’t have the financing yet,” he said
Once signed, the PRASA Revitalization Act will have to go through a validation process that could take more than 200 days. In the meantime, the agency will begin talks with creditors.
“We can’t wait the 200 days, so we’ll try to get a bridge loan or interim line of credit,” he said, noting PRASA has already preliminarily approached potential creditors who are waiting for the bill to be translated into English.
“There is anxiety about the potential effects of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) and the fiscal oversight board it includes, which should be constituted by mid-September,” he said, , adding that public corporations are not automatically included under the board’s jurisdiction.
“If the board waives jurisdiction, it gives us a vote of confidence. If they assume jurisdiction, there will be someone there to check everything we do, before we do it,” he said.
While that scenario plays out, PRASA will also continue negotiating with the Environmental Protection Agency and the U.S. Department of Agriculture’s Rural Development Program to which it owes a combined $30 million in loan payments it missed on the July 1 due date.
As this media outlet reported, PRASA reached forbearance agreements with the agencies, with the EPA granting a six-month moratorium on the $18 million it is owed, while Rural Development granted a three-month stay on a $12.6 million payment due, but required a $1.4 million payment from the agency last week.
“We hope to be able to sit with them to work on the details of who we expect the refinancing to occur, and there will be a negotiation,” he said.
He also said the PRASA Revitalization Act — which provoked clashes between members of the House and Senate last month who disagreed on how much debt the utility should be allowed to incur — will need technical amendments to correct changes made in the re-writes it experienced in recent months.