A federal judge overseeing the debt-restructuring process for Puerto Rico's Electric Power Authority has ordered all parties to mediation in an effort to resolve the impasse that has hindered progress. The power company holds over $10 billion in debt and other claims, making it the largest debtor among the island's state agencies. Previous attempts to restructure the debt have failed, negatively impacting the island's ability to attract investors and leaving residents with some of the highest electric bills in any U.S. jurisdiction.
The judge emphasized the need for swift action, stating that movement is necessary to reach a resolution. A two-month stay on litigation was imposed, urging all parties to engage in good-faith negotiations immediately. The judge also reminded the parties to consider the well-being of Puerto Rico's people throughout the mediation process.
The recent ruling by a First Circuit appeals court in Boston restored $9 billion worth of claims made by bondholders, complicating the debt restructuring process. The federal control board overseeing Puerto Rico's finances highlighted the power company's lack of net income to pay bondholders, further complicating the situation.
Despite the mediation efforts, there is skepticism about reaching a compromise. The lead mediator expressed frustration over the lack of progress and urged all parties to make incremental steps towards a solution. Civil society groups in Puerto Rico have rejected a proposed debt-restructuring plan that would lead to higher power bills, warning that it could result in business closures, job losses, and increased migration from the island.
The deteriorating infrastructure of the power company, compounded by chronic power outages since Hurricane Maria in 2017, underscores the urgent need for maintenance and investment. The groups emphasized that diverting funds to pay bondholders would perpetuate the dysfunction of the electrical system.
As negotiations continue, the board has pledged to negotiate in good faith and in the best interest of the people of Puerto Rico. The outcome of the mediation process will have significant implications for the island's future economic stability and the well-being of its residents.
