The chairman of the U.S. congressional committee that oversees Puerto Rico on Thursday said the bankrupt island's federal oversight board was dragging its feet on approving a $9 billion power utility restructuring.
Utah Republican Rob Bishop, who chairs the U.S. House Committee on Natural Resources, said the board's inaction was "troubling" in a letter to board Chairman Jose Carrion, adding that the debt restructuring at Puerto Rico's power authority, PREPA, was already green-lit by Congress.
Bishop's gripe is over a deal struck earlier this year between PREPA and its creditors to restructure some $9 billion of debt. PREPA's financial woes are a microcosm of an economic crisis, marked by $70 billion in total debt, that has pushed Puerto Rico into the biggest municipal bankruptcy in U.S. history.
Negotiations between PREPA and its bondholders were rocky, lasting more than two years and running into a major roadblock when an initial version of the accord was rejected by Puerto Rico's new governor.
Now, the latest deal appears to be hitting a snag too, as the U.S. territory's oversight panel, created by U.S. lawmakers to manage its finances, has yet to approve it.
"It appears there is no consensus from the oversight board in favor of certifying" the deal, Bishop said.
But Bishop argued the board has no right to review it. The 2016 Puerto Rico rescue law known as PROMESA - which originated in Bishop's committee - included language to keep pre-existing compromises like PREPA's out of the board's reach.
The board's insistence on reviewing the deal is "outside the scope" of its powers, Bishop said, and could "result in severe, adverse effects for the island, including a dampening of the board's ability to negotiate in good faith with creditors."
Bishop and other lawmakers have supported the quick implementation of the PREPA deal, in large part because it was a compromise struck out of court.
PROMESA allows Puerto Rico and its agencies to slash debts through bankruptcy, but Republican lawmakers, wary of massive cuts to bondholders, have tried to encourage out-of-court compromises.
Under the PREPA deal, creditors would take repayment cuts of only 15 cents on the dollar, smaller than the hefty haircuts likely to face creditors of other Puerto Rican debt issuers now in bankruptcy.
(Reporting by Nick Brown in New York; Editing by Lisa Shumaker)