NEW YORK--(BUSINESS WIRE)--The Puerto Rico Electric Power Authority (PREPA) Bondholder Group today announced that they have reached a Term Sheet Agreement with PREPA to form the basis of a recovery plan for PREPA. The term sheet contemplates an exchange of outstanding PREPA bond debt. As part of the agreement, the parties will extend their forbearance agreement until September 18, 2015, in order to reach a recovery and support agreement.
Under the economic terms of the bond exchange bondholders will be providing a reduction in the amount of outstanding bond debt, near term debt service relief and a lowering of interest rates. Collectively these benefits will significantly enhance PREPA’s ability to invest in operational improvements and will benefit ratepayers. In return for these concessions bondholders are receiving certainty of repayment through a proven financing structure (“securitization”) that has been used successfully for other similarly situated utilities to lower debt service costs.
“Today’s announcement represents a significant positive step for all stakeholders involved – including the people of Puerto Rico – and we are pleased to have reached this agreement with PREPA,” said Stephen Spencer of Houlihan Lokey, the PREPA Bondholder Group’s financial advisor. “We believe it provides PREPA with a fresh start and financial flexibility, with bondholders providing meaningful sacrifices to make that happen. We are committed to working with PREPA to finalize these steps and complete the transaction as quickly as possible.”