PREPA Enters Restructuring Support Agreement with Ad Hoc Bondholder Group, Fuel Line Lenders and Government Development Bank

SAN JUAN, Puerto Rico, Nov. 5, 2015 /PRNewswire/ -- The Puerto Rico Electric Power Authority (PREPA) announced today that it has entered into a restructuring support agreement with the Ad Hoc Group of PREPA bondholders, comprising traditional municipal bond investors and hedge funds, its fuel line lenders and the Government Development Bank for Puerto Rico.  The restructuring support agreement formalizes the previously announced agreements on economic terms between PREPA, the Ad Hoc Group and the fuel line lenders in September 2015. 

"We are making significant progress in transforming PREPA and the formalization of our agreement solidifies the support of key creditors, and will help facilitate a sustainable capital structure for PREPA," said Lisa Donahue, Chief Restructuring Officer.  "We are working to build a strong financial foundation for PREPA and we are continuing constructive negotiations with our monoline insurers in order to achieve a consensual recovery plan.  The financial measures and agreements we are working to implement are strengthening PREPA and are in the best interests of all stakeholders."

"We are confident that the PREPA Revitalization Act provides the necessary support to transform PREPA for the benefit of our employees, their families, the people and the businesses of Puerto Rico. We are building support for PREPA's transformation and establishing a stronger entity that ensures Puerto Ricans have a reliable power utility that they can depend upon for generations to come," commented Harry Rodriguez, Chairman of PREPA's Governing Board.

The restructuring support agreement provides a structured framework to implement the previously announced economic agreements, and is designed to provide PREPA with five year debt service relief of more than $700 million and a permanent reduction in PREPA's principal debt burden of more than $600 million.  The agreement also outlines other elements of PREPA's recovery plan, including new governance standards, operational improvements, rate structure proposal and a capital plan.

The material economic terms of the agreement include:

• The Ad Hoc Group will exchange all of their debt for new securitization notes and receive 85% of their existing claims in new securitization bonds, which must receive an investment grade rating.
• Bondholders will have the option to receive securitization bonds that will pay cash interest at a rate of 4.0% - 4.75% (depending on the rating obtained) ("Option A Bonds") or convertible capital appreciation securitization bonds that will accrete interest at a rate of 4.5% - 5.5% for the first five years and pay current interest in cash thereafter ("Option B Bonds").
• Option A Bonds will pay interest only for the first five years, and Option B Bonds will accrete interest but not receive any cash interest during the first five years.
• All uninsured bondholders will have an opportunity to participate in the exchange.
• Ad Hoc Group will negotiate with PREPA in good faith to backstop a financing on terms to be mutually agreed that will allow for a cash tender for bonds held by non-forbearing creditors.
• Fuel line lenders will have the option to convert existing credit agreements into term loans with a fixed interest rate of 5.75% per annum, to be repaid over 6 years in accordance with an agreed upon schedule or exchange all or part of principal due under the existing credit agreements for new securitization bonds to be issued on the same terms described above.
• PREPA's debts owed to the Government Development Bank for Puerto Rico will be treated in substantially the same manner as those owed to the fuel line lenders.

PREPA continues to negotiate with its monoline bond insurers with the goal of reaching an agreement on a consensual recovery plan among all of its major financial stakeholders.

SOURCE Puerto Rico Electric Power Authority