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Judge calls for debt restructuring of Puerto Rico Electric Company

San Juan, Puerto Rico — A federal judge on Wednesday ordered a new round of mediation talks aimed at restructuring more than $8 billion in debt held by Puerto Rico’s electric utility as it struggles to recover from Hurricane Fiona.

In addition, U.S. District Court Judge Laura Taylor Swain has authorized a federal oversight committee overseeing the island’s finances to go to court to determine how much bondholders should receive. as they sought to recoup their investments.

The board earlier warned that all expenses related to debt repayment would be passed on to the power company’s 1.47 million customers.

The council has also been ordered to file a debt restructuring plan for the island’s Electric Power Authority by December 1, with a confirmation hearing scheduled for mid-2023.

The board welcomed the decision in a brief statement, saying it is calculated to resolve key contentious legal issues as quickly as possible: “Concurrent litigation and mediation facilitate resolutions for all constituencies.”

The decision comes as more than 311,000 customers remain without power for more than 10 days after Fiona slammed into the southwestern tip of Puerto Rico as a Category 1 storm, causing a power outage at the island scale. Several hospitals also remain connected to generators.

“It’s totally unacceptable,” said Manuel Calderón Cerame, spokesman for the main opposition party, the People’s Democratic Party.

Fuel disruptions have forced grocery stores, gas stations and other businesses to temporarily close as demand for diesel to power generators increases. Hundreds of schools also remain closed.

Government officials have pledged to try to restore power to 91% of customers by Friday as they push to restructure the power company’s debt.

In early March, Pierluisi announced that his administration was abandoning a proposed debt restructuring agreement because it was not favorable to the island’s economy or the electricity company’s customers.

Then, on September 16, officials announced that mediation talks had failed. In response, a bondholder group that owns or insures 65% of the power company’s debt demanded that the bankruptcy filing be dismissed and a receiver be appointed.

On Wednesday, the judge denied their request.

A spokesperson for the bond group did not immediately return a message for comment.

The power company holds the largest debt of any government agency in Puerto Rico, and it’s one of two agencies whose debt has yet to be restructured more than five years after the U.S. territory filed largest municipal bankruptcy in history.

Puerto Rico’s Highways and Transportation Authority still holds $5.8 billion in debt.

ABC News

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