Puerto Rico oversight board offers $3 billion settlement for power utility debt

The Financial Oversight and Management Board for Puerto Rico has proposed a $3 billion settlement to resolve bondholder claims tied to the Puerto Rico Electric Power Authority, in a renewed attempt to close one of the island’s longest-running debt fights.

The proposal, disclosed Tuesday, would cover more than $10 billion in PREPA debt and combines cash payments with new bond issuances. The board said the offer is $1.4 billion higher than its previous proposal.

Robert F. Mujica Jr., the board’s executive director, said Puerto Rico needs to close what he called the final chapter of its fiscal crisis and that restructuring the utility is essential to reliable and affordable electricity.

A decade-long bankruptcy fight

PREPA has been in restructuring talks for roughly a decade, and the utility remains one of the most sensitive pieces of Puerto Rico’s wider fiscal crisis.

Puerto Rico first said in 2015 that it could not pay its more than $70 billion debt load. Congress created the oversight board in 2016 under the Puerto Rico Oversight, Management and Economic Stability Act, and the island’s government filed for what became the largest municipal bankruptcy in U.S. history in 2017.

The board says it has completed 12 restructurings and eliminated more than $55 billion in debt payments over 40 years, but PREPA has remained unresolved.

What the offer changes

The latest proposal is meant to move beyond earlier rounds of negotiation. Bondholders who have not yet settled are seeking about $8.5 billion in claims, far above the board’s new offer.

The board said the settlement would combine cash and new debt, but it has not identified a source of financing. That leaves open a central question in the case: who ultimately pays, and whether the cost could put pressure on electricity rates.

Previous agreements with some creditors and bondholders remain in place.

Why it matters

The PREPA case has implications beyond the bond market. The utility sits at the center of Puerto Rico’s power grid, where outages and high electricity costs have long been a concern for residents and businesses.

A settlement could remove the last major unresolved piece of Puerto Rico’s debt restructuring. But if the financing plan pushes costs onto the utility system, it could also affect customer bills and the affordability of power on the island.

What comes next

The next stage is whether bondholders accept the revised offer or counter with new terms. Court filings or mediation updates could also show whether the proposal can advance through the restructuring process.

Officials and ratepayer advocates are likely to focus on whether the board can identify financing without worsening the burden on electricity customers.

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