(Reuters) - Puerto Rico’s beleaguered electric utility has received court approval to borrow $300 million to help pay expenses, well below the $1.3 billion initially sought but enough to avert power outages it had warned about.
On Monday, U.S. District Court Judge Laura Taylor Swain approved the loan which had been opposed by creditors of the U.S. commonwealth and its utility, the Puerto Rico Electric Power Authority, better known as PREPA.
The federal oversight board, which represents Puerto Rico and PREPA in the island’s historic financial restructuring, initially sought $1.3 billion to assist with restoring power after Hurricane Maria cut off electricity across much of the island.
The board had argued the utility faced power outages without an immediate cash infusion.
Creditors of the utility and the U.S. territory opposed the initial loan over its terms and size. Last week, the two sides squared off in court, and the judge prodded Puerto Rico’s board to reduce the loan to $300 million and rework its terms.
Bond insurer National Public Finance Guarantee Corp had questioned whether PREPA even needed a loan while Puerto Rico’s general obligation bondholders argued the board sought to subsidize PREPA with funds needed by the island’s government.
Puerto Rico is more than $70 billion in debt and PREPA has more than $14 billion in liabilities, including some $8 billion in Power Revenue Bonds.
Quarreling over the loan package has been taking place amid a separate fight between Puerto Rico and creditors over the territory’s revised fiscal plan.
The plan would use $18 billion from the U.S. government to turn Puerto Rico’s deficit into a $3.4 billion surplus within six years.
Last week, creditors cast doubt on the plan, saying in a joint statement it “fails to provide a credible basis on which to restructure the island’s debt.”
The case is In re the Financial Oversight and Management Board for Puerto Rico, U.S. District Court, District of Puerto Rico, No. 17-BK-3283.
Reporting by Jim Christie; Editing by Tom Brown