Puerto Rico fiscal board offers $3 billion settlement to bondholders in PREPA debt case

Puerto Rico’s Financial Oversight and Management Board has proposed a $3 billion settlement to bondholders in the long-running restructuring of the Puerto Rico Electric Power Authority, or PREPA, in its latest push to close one of the island’s last major bankruptcy cases.

The proposal is aimed at resolving more than $10 billion in utility debt. The board said the package would include cash payments and new bond issuances, and that it is $1.4 billion higher than its previous offer.

The holdout bondholders are seeking about $8.5 billion in claims, according to the board’s account of the case. PREPA has been trying to restructure its debt for roughly a decade.

A final push in Puerto Rico’s debt crisis

The PREPA case has remained one of the most stubborn pieces of Puerto Rico’s broader fiscal collapse. In 2015, Puerto Rico said it could not pay its more than $70 billion debt load. Congress responded by creating the oversight board in 2016, and the island entered the largest municipal bankruptcy in U.S. history in 2017.

The board has since completed 12 debt restructurings and says it has eliminated more than $55 billion in debt payments over 40 years. PREPA is now one of the last major unresolved cases left on that docket.

Board executive director Robert F. Mujica Jr. said Puerto Rico must close this last chapter of its fiscal crisis and argued that restructuring the utility is essential to recovery and to reliable, affordable electricity.

Financing remains the key question

For now, the board has not identified a source of financing for the proposed settlement. That leaves open the central question of how the deal would be paid for if bondholders accept the revised terms.

The financing issue matters because any solution tied to utility revenues or other public resources could eventually affect electricity costs for residents already dealing with high bills and outages. The board’s offer keeps that concern in the background without answering it.

The deal also does not stand alone. The board said prior agreements with several creditors and some bondholders in the case remain in place, meaning the new proposal would build on earlier settlements rather than restart the process from scratch.

What happens next

Bondholders will now review the revised offer and decide whether to continue negotiating or resist the proposal.

If the sides do not reach an agreement, court proceedings or further mediation could follow. The settlement proposal is the clearest sign yet that the board wants to end the PREPA case, but it still leaves the hardest issue unresolved: who will pay for it.