Fiscal board OKs proposed $1.8 billion PRASA bond refinancing
By The Star Staff
The Financial Oversight and Management Board on Tuesday gave the green light to a proposed $1.8 billion Puerto Rico Aqueduct and Sewer Authority (PRASA) bond refinancing, the second one since December.
The oversight board also allowed PRASA to engage in a Financial Assistance Agreement in the amount of $46.3 million under the Drinking Water State Revolving Fund Program.
The approval is contained in letters sent to Fiscal Agency and Financial Advisory Authority Executive Director Omar Marrero on Tuesday.
As it did in December, PRASA wants to take advantage of market conditions that allow for a reduction in interest payments and that are conducive to saving money.
The letter states the bond issue transaction is expected to generate $275 million in present value savings, roughly $434 million in gross savings through fiscal year 2047 and average annual debt service savings of $16.7 million.
The $46.3 million Financial Assistance Agreement under the Drinking Water State Revolving Fund Program breaks down the funding into an amount equal to $22.2 million as an interest-bearing (1%) loan and the remaining $24.1 million as a non-interest bearing and principal forgiveness loan.
The agreement relates to PRASA’s loan agreement from July 2019 with the U.S. Environmental Protection Agency (EPA) to restructure the outstanding balances from prior loans, the oversight board said.
“PRASA has substantial financial needs to comply with the capital improvements required under the 2021 Fiscal Plan,” the board said. “As explained in its 2021 Fiscal Plan, PRASA must improve its operational capabilities and invest in its capital improvements program.”
Aside from the loans, PRASA also expects to receive additional financing from the U.S. Department of Agriculture’s (USDA) Rural Development program. In addition, PRASA has been awarded $3.7 billion in Federal Emergency Management Agency funding, the oversight board said.
In approving the two transactions, the board said they will be cost-effective for PRASA.
In August 2019, PRASA and the Puerto Rico government reached an agreement with the EPA and the USDA to a consensual modification of about $1 billion of outstanding loans under Section 207 of the Puerto Rico Oversight, Management and Economic Stability Act.