WASHINGTON (Reuters) - Puerto Rico’s governor told U.S. lawmakers on Wednesday that the island’s debt-laden power utility, PREPA, could undergo an in-court restructuring process akin to U.S. bankruptcy if a consensual deal with creditors cannot be carried out.
Governor Ricardo Rossello said at a U.S. House Natural Resources subcommittee hearing that his administration would prefer a consensual deal to a bankruptcy, as lawmakers questioned him about delays in completing a nearly $9 billion debt restructuring at PREPA.
Government officials are meeting with PREPA creditors on Thursday, Rossello said.
The U.S. territory’s utility and its creditors reached a tentative debt restructuring in December 2015 before Rossello took office. The deal would see bondholders accept 15 percent cuts to repayment.
When Rossello took office in January 2017 many expected him to rubber-stamp the deal, but he has said he would seek more concessions from bondholders. On Monday, his administration made public a revised offer to creditors.
“If PREPA was pushed into (bankruptcy), do you expect that outcome would be better for Puerto Rico?” asked Representative Doug LaMalfa, a Republican from California.
Rossello replied that “I champion and value” consensual renegotiation efforts, but that “doesn’t take a back seat” to seeking the best terms for PREPA.
The utility is seen as a bellwether for Rossello’s approach to restructuring $70 billion in public debt that is pushing Puerto Rico’s economy toward collapse. The island has a 45 percent poverty rate, near-insolvent public health and pension systems, and a shrinking population.
At another point in the hearing, Rossello was asked about whether he would use a provision that allows for agencies such as PREPA to be pushed into bankruptcy.
“If a deal is not able to be executed, then those provisions would be executed,” Rossello replied. It’s been my strong view...that we want to engage in consensual efforts. So what we’re asking for is that opportunity.”
He said the current deal does not seek enough concessions from creditors, and could hurt consumers because of added charges. A better deal, he said, would focus on sustainable growth and include public-private partnerships to help modernize PREPA.
Rossello said he supports extending a forbearance agreement that shields PREPA from lawsuits, set to expire on March 31, to give sides more time to negotiate a restructuring consensually.
While the focus was on PREPA on Wednesday, the public health systems kept coming up. Rossello’s administration wants Congress to increase the island’s federal Medicare reimbursements, which are proportionately lower than those of U.S. states.
“Congress really needs to act in the next coming weeks” to help bolster Puerto Rico’s health funding, he said.
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