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Puerto Rico has clinched a new deal to restructure its electric utility’s nearly $9bn of debt with bondholders, saving one of the rare deals the indebted US territory has been able to strike with its creditors.
Governor Ricardo Rossello’s office said on Thursday that the new deal, subject to approval from a congressionally approved control board, would save the island $2.2bn in debt service over the next five years.
The negotiations have been scrutinised intently by bondholders as a precursor to how the new governor, who won election last year, would deal with creditors on its other debts. Puerto Rico counts roughly $69bn of debt including the $9bn of bonds related to Prepa — the power utility — and has defaulted on large swaths of its obligations since 2015.
The island has suffered under a near decade-long recession, with residents migrating to the US mainland in increasing numbers as conditions have deteriorated.
“The enhancements to the restructuring support agreement were the result of good faith negotiations by my team and Prepa’s major creditors,” said Governor Rosselló. “I believe that the negotiated terms represent fair additional contributions by all parties to the restructuring support agreement and will set Prepa on a path toward becoming a modern utility.”
The governor’s office did not release details of the agreement or comment on whether creditors had agreed to additional cuts on their holdings. Prepa bondholders had agreed to a 15 per cent haircut in 2015, including $700m in debt service relief and a permanent cut in its principal debt load by more than $600m.
A group of Prepa bondholders said they were pleased to reach the agreement, which has been extended to April 13 to give the island time to update the documents terms.
In a statement, the group said: “We have worked for nearly three years to support Prepa and the completion of the restructuring support 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.”