A federal control board that oversees Puerto Rico’s finances announced Tuesday that it has offered a $3 billion settlement to bondholders in a new push to finally restructure more than $10 billion in debt held by the U.S. territory’s power company.
The board is proposing paying cash and offering the issuance of new bonds to bondholders that have not settled and are seeking some $8.5 billion in claims.
The proposed settlement represents $1.4 billion more than previously offered.
Puerto Rico’s Electric Power Authority has been trying to restructure its debt for roughly a decade, after the U.S. territory announced in 2015 that it was unable to pay its more than $70 billion debt load. That prompted U.S. Congress to create the federal board in 2016. A year later, Puerto Rico’s government filed for the largest municipal bankruptcy in U.S. history.
Since then, the board and bondholders of the power company's debt have been at odds over compensation, with multiple mediation attempts failing.
“Puerto Rico must be able to close this last chapter of its fiscal crisis and move forward,” said Robert F. Mujica Jr., the board’s executive director.
He stressed that restructuring the company’s debt “is essential to Puerto Rico’s recovery — to the reliable, affordable electricity and the new investment its residents and businesses deserve.”
The board said it has not yet identified the source to finance the proposed settlement.
Some worry that the source of funds could come from an increase in power bills, which already are among the highest in any U.S. jurisdiction as chronic outages persist.
The board noted that previous agreements reached with several creditors and some bondholders in the power company’s case remain in place.
The board said that overall, it has completed 12 debt restructurings for Puerto Rico’s government, eliminating more than $55 billion in debt payments over 40 years.
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