The Puerto Rico Electric Power Authority has moved closer to default, following failed negotiations on a $9 billion restructuring deal, the Wall Street Journal reports.
Four members of a seven-person federal board overseeing PREPA on Wednesday rejected the restructuring deal, leaving the utility few options but default and a court supervised bankruptcy proceeding.
- Earlier in the week bond insurers sued Puerto Rico's financial oversight board, accusing them of improperly withholding approval of the PREPA restructuring deal.
PREPA’s problems have been brewing for year and may now be coming to a head. The tale goes all the way to the U.S. Supreme Court, which a year ago rejected Puerto Rico’s bid to revive its Recovery Act, which would have scuttled the restructuring of the utility.
Nonetheless, restructuring efforts appear to have failed. The Journal reports that members of the oversight board said rejection of the restructuring deal "closes the door on this request for debt restructuring" and makes a bankruptcy filing "the most likely course of action under the circumstances."
The four board members who voted against the deal wanted to end PREPA’s run as a government monopoly and turn it into a regulated private utility. Those board members said the restructuring deal would have scared off potential investors.
Meanwhile, default looms for the utility. PREPA has a $453 million debt payment due on July 1. A default would be one of the largest ever for a U.S utility.