Legislature urged to spurn debt adjustment plan proposed for PREPA
By The Star Staff
Electrical Industry and Irrigation Workers Union (UTIER by its Spanish acronym) President Ángel Figueroa Jaramillo urged the Legislature on Tuesday to stop the proposed debt adjustment plan for the Puerto Rico Electric Power Authority (PREPA), which would restructure some $9 billion in debt, as he said it would be detrimental to the island’s financial health.
Figueroa Jaramillo spoke during a public hearing before the Senate Committee on Strategic Projects and Energy chaired by Popular Democratic Party Sen. Javier Aponte Dalmau, on Senate Resolution 270.
“The Legislature has to assume its historical responsibility to stop the agreements that the [oversight] board has reached regarding PREPA and that are detrimental to the financial health of the people of Puerto Rico,” Figueroa Jaramillo said. “The only way to do that is for the Legislature not to pass the legislation the board needs to make that deal happen. If this Legislature approves the ‘Restructuring Support’ agreement (RSA), it would be responsible for the fatal consequences that are coming because they had the opportunity to stop those increases, and did not protect the interests of Puerto Rico.”
The oversight board reached an agreement with PREPA bondholders that is embodied “in the infamous RSA,” the union leader said.
The RSA intends “to guarantee the payment of these bonds through the approval of legislation that allows an increase in the rate as collateral for the new bonds, and the creation of a public corporate entity, which manages this debt service.”
The oversight board recently said it believes it can move the debt deal forward without legislative approval.
Rolando Emanuelli Jiménez, a lawyer for UTIER, said “they want to make a mega public corporation totally untouchable, to have control of the increase in the rate to pay the bondholders above the operating expenses, of maintenance, among others.”
He pointed out that the proposed entity would not have to comply with more than 16 laws, such as the Government Ethics Law. He also noted that the plan could be more onerous in the promise of payment.
Emanuelli Jiménez said the agreement was made before the pandemic and economic conditions on the island have changed.
Along the same lines, Figueroa Jaramillo said the first thing that has to be done in a debt restructuring process under the U.S. Bankruptcy Code is to determine the validity of the credit that is intended to be considered.
“In addition, the classification as insured or uninsured creditors must be considered to determine validity … [and] to determine the degree of debt cutback or reduction allowed by law according to the economic circumstances of the debtor,” he said. “Any agreement that does not take these two factors into account, and does not apply them to the benefit of the people of Puerto Rico, is a bad agreement that this Legislature must reject.”
To questions from Aponte Dalmau, Figueroa Jaramillo said that under the proposed new agreement, $868 million would be allocated annually for the payment of the debt, while PREPA previously paid $600 million.
“The reason is that before it was paid as an already established promissory note,” he said. “In this formula, it is a tax according to consumption. … If the country consumes more, more is paid to the debt.”
Likewise, the union leader maintained that the agreement with the bondholders says that the debt is paid first. Critics have also said the proposed transition charge that would be added to the rate could increase rates by 13%.
Citizen Victory Movement Sen. Rafael Bernabe Riefkohl stated that “here the fundamental question is whether the Legislature, not the Board, is willing to tell the bondholders that the payment is zero, whether this Legislature has the ability to do that.”
“That is what worries me,” he said. “I haven’t seen that provision so far. We can’t pay here, period.”
Figueroa Jaramillo stressed that the Legislature “should not authorize any transaction with bondholders in the case of Title III of the Electric Power Authority that calls for the disbursements or payments to bonds issued illegally, or that are uninsured, above the actual value of said bonds.”
The oversight board has said it intends to file a debt adjustment plan for PREPA in March.
Also on Tuesday, the Office of the Special Independent Prosecutor (SIP) Panel decided not to assign an SIP to investigate former PREPA Board Chairman Ralph Kreil for allegedly signing certificates for PREPA clients while working as a board member.