The Puerto Rico Electric Power Authority (PREPA) has agreed to a new debt deal with its creditors, but the U.S. territory is still teetering on the brink of bankruptcy.
Earlier this month, PREPA and its creditors agreed to restructure $8.9 billion in debt in a deal that would save $2.2 billion over five years.
Unfortunately, Puerto Rico’s next debt deadline on May 1 is rapidly approaching.
Last year’s PROMESA rescue law blocked creditor lawsuits until May 1, 2017, allowing a U.S. oversight board to negotiate with debt holders to restructure $70 billion in debt. Prospects of a deal by May 1 look bleak. If a deal isn’t reached by the deadline, Puerto Rico is expected to pursue a bankruptcy-like court-sanctioned restructuring.
Height Securities’ Edwin Groshans isn’t optimistic about the long-term prospects for Puerto Rico, but says the PREPA deal is a positive for Assured Guaranty Ltd. AGO 1.68% and MBIA Inc. MBI 1.29%.
“The amended PREPA RSA is beneficial for AGO and MBI; however, it neither aggresses the Commonwealth’s broader fiscal crisis nor improves its certified budget,” Groshans said.
“Our increased insured loss estimates for all other PR issues remains…
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