Puerto Rico utility to file for bankruptcy – MarketWatch

Puerto Rico's public power monopoly will file for bankruptcy, the island's federal financial supervisors ordered Friday, a move they said would help advance a massive privatization effort to lower power costs.

The federal board overseeing Puerto Rico's financial rehabilitation voted to place the electric utility known as Prepa under court protection to adjust its $9 billion in debt. The move was widely telegraphed after the seven board members voted 4-3 earlier this week to reject a proposed debt restructuring agreement, as first reported by The Wall Street Journal.

Friday's vote to initiate the bankruptcy was unanimous.

Creditors of the Puerto Rico Electric Power Authority mounted a last-ditch campaign this week to keep the utility out of bankruptcy, filing litigation against the oversight board to preserve the proposed settlement and offering a $450 million emergency loan.

"We are in ongoing negotiations with creditors" that could affect when the bankruptcy petition is filed, said the oversight board's executive director Natalie Jaresko.

In rejecting the deal, the four board members who voted it down said it would impede efforts to shift Prepa from a government monopoly to a regulated private utility through privatization of the island's outdated and inefficient power plants.

Creditors have argued that restructuring the utility's debts would pave the way for privatization by boosting Prepa's creditworthiness.

A federal rescue package enacted by Congress last year empowers the oversight board to write down Puerto Rico bonds either consensually through negotiated deals or nonconsensually with the help of the courts.

Write to Andrew Scurria at Andrew.Scurria@wsj.com

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Puerto Rico utility to file for bankruptcy - MarketWatch