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Feds Say PREPA Can Borrow $300 Million To Keep Beleageured Electric Utility Running

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SAN JUAN — Puerto Rico’s beleaguered electric utility has received court approval to borrow $300 million to help pay expenses, well below the $1.3 billion initially sought but enough to avert power outages it had warned about.

On Monday, U.S. District Court Judge Laura Taylor Swain approved the loan which had been opposed by creditors of the U.S. commonwealth and its utility, the Puerto Rico Electric Power Authority, better known as PREPA.

The federal oversight board, which represents Puerto Rico and PREPA in the island’s historic financial restructuring, initially sought $1.3 billion to assist with restoring power after Hurricane Maria cut off electricity across much of the island.

The board had argued the utility faced power outages without an immediate cash infusion.

Creditors of the utility and the U.S. commonwealth opposed the initial loan over its terms and size. Last week, the two sides squared off in court, and the judge prodded Puerto Rico’s board to reduce the loan to $300 million and rework its terms.

Bond insurer National Public Finance Guarantee Corporation had questioned whether PREPA even needed a loan while Puerto Rico’s general obligation bondholders argued the board sought to subsidize PREPA with funds needed by the island’s government.

Puerto Rico is more than $70 billion in debt and PREPA has more than $14 billion in liabilities, including some $8 billion in Power Revenue Bonds.

Quarreling over the loan package has been taking place amid a separate fight between Puerto Rico and creditors over the commonwealth’s revised fiscal plan.

The plan would use $18 billion from the U.S. government to turn Puerto Rico’s deficit into a $3.4 billion surplus within six years.

Last week, creditors cast doubt on the plan, saying in a joint statement it “fails to provide a credible basis on which to restructure the island’s debt.”

The case is In re the Financial Oversight and Management Board for Puerto Rico, U.S. District Court, District of Puerto Rico, No. 17-BK-3283.


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The Author

John McCarthy

John McCarthy

John McCarthy is primarily known for his investigative reporting on the U.S. Virgin Islands. A series of reports beginning in the 1990's revealed that there was everything from coliform bacteria to Cryptosporidium in locally-bottled St. Croix drinking water, according to a then-unpublished University of the Virgin Islands sampling. Another report, following Hurricane Hugo in 1989, cited a Federal Emergency Management Agency (FEMA) confidential overview that said that over 40 percent of the U.S. Virgin Islands public lives below the poverty line. The Virgin Islands Free Press is the only Caribbean news source to regularly incorporate the findings of U.S. Freedom of Information Act requests. John's articles have appeared in the BVI Beacon, St. Croix Avis, San Juan Star and Virgin Islands Daily News. He is the former news director of WSVI-TV Channel 8 on St. Croix.

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