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A plan to restructure more than US$9 billion in debt held by Puerto Rico’s ailing power company hit a big snag this week after a group of bondholders terminated their deal with a federal control board overseeing the United States territory’s finances.
The deal would have allowed Puerto Rico’s government to pay creditors US$2.6 billion instead of the full US$8.5 billion that some bondholders are demanding.
BlackRock Financial Management and other investment funds had agreed to the board’s deal and its subsequent amendments two years ago. But they walked away after the Trump administration terminated all but one member of the federal control board overseeing debt negotiations.
On Monday, bondholder groups that had opposed the board’s proposals filed a document noting that BlackRock and others were joining them in a deal that would become effective on October 1. The enlarged group now holds or insures nearly 90 per cent of outstanding bonds issued by Puerto Rico’s power company, according to a court filing.
Experts have said the dismissal of almost the entire board could lead to the appointment of new members who might be favourable to hedge funds seeking full repayment.