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  • The San Juan Daily Star

Marrero Díaz calls PREPA debt plan a ‘step in the right direction’

Omar Marrero Díaz, executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority

By The Star Staff

Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) Executive Director Omar Marrero Díaz called the proposed debt adjustment plan for the Puerto Rico Electric Power Authority (PREPA) a “step in the right direction” and did not express concern over provisions that would preempt the AAFAF’s powers.

The debt adjustment plan (PAD by its Spanish acronym) states that the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, would preempt Act 101-2020, which provides the AAFAF with certain approval rights over bond issuances by Puerto Rico instrumentalities.

Marrero Díaz told the STAR this week that as long as the bond issuances do not go against the fiscal plan, there will be no problem. A 2020 law enacted by the island government states that bond issuances can only be realized to pay for capital improvements and not to pay debt.

“AAFAF is obligated to obey public policy,” Marrero Díaz said. “In this case, the law will be preempted. It is an issue of legal clarity.”

The PAD calls for two series of bond issuances that will be exchanged for PREPA bonds.

Marrero Díaz welcomed the PAD, which was submitted to the Title III bankruptcy court last week, because it goes hand in hand with a process of mediation and with litigation, the latter of which seeks to limit bondholders’ claims. While the bondholders are seeking payment of an estimated $8.3 billion in bonded debt, the Financial Oversight and Management Board for Puerto Rico is trying through litigation to disallow any secured claim held by the bondholders beyond the estimated $16 million in funds actually deposited in a Sinking Fund, and limit any potential recourse, secured or unsecured, to the monies deposited in the Sinking Fund.

“The plan can always be modified,” Marrero Díaz said. “The central government had nine debt adjustment plans.”

The AAFAF executive director, who is also the island’s secretary of state, praised the fact that PREPA’s PAD cuts the utility’s $10 billion debt by almost 50%, does not cut pensions and does not impose a sun tax or penalties for using solar panels. He said poor families will not be required to pay a proposed “legacy charge,” which may involve both a volumetric component based on customer class and a customer’s electricity use, and/or a flat monthly connection charge for being connected to PREPA’s electricity grid, based on customer class.

Gov. Pedro Pierluisi Urrutia said earlier this week that the plan did not yet have his support.

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