Puerto Rico’s Electrical Power Authority, also known as PREPA, is experiencing a surge in overdue accounts. According to a report from an FTI Consulting subsidiary, since 2012, the U.S. territory’s electrical authority has seen a 219% increase in the number of company and residential accounts that are at least 120 days late in making their payments. The report was generated as part of an agreement with the creditors, which retain more than $9 billion of the electrical utility company’s debt.
By September 2014, late balances owed to PREPA not just among businesses and residents, but also by government entities had hit $1.75 billion. At least $708.6 million were payments that were late by a minimum of four months.
Puerto Rico’s governmental entities owe about $758 million, with certain public corporations unable to even pay their electricity bills and refusing to agree to payment plans to get their accounts current. The FTI report recommends that Prepa put into place an amnesty period for clients that are delinquent, retain a collection agency, increase late fees and charges for reconnection, and push for timely payments.
Prepa is getting ready to unveil a plan early next year to restructure its $8.6 billion of debt. Its debt has been issued a junk rating by credit rating agencies.
Meantime, Puerto Rico is talking to four bond insurers to get at least part of up to $2.9 billion in bonds insured. These are bonds the financially beleaguered Commonwealth wants to put out later this year. The bond issues would let the territory access a deeper capital pool in the municipal bond market than the small hedge funds that purchased $3.5 billion of its debt earlier this year.
Puerto Rico is also seeking to refinance a $2.2 billion loan that the Government Development Bank made to its Highways and Transportation Authority to try and improve its poor financial health and give the territory more time to reverse its failing economy. To make the sale, the island has to pass laws that would increase an oil tax that could allow it to back the bonds.
Puerto Rico Bond Fraud
Puerto Rico’s muni bonds are the focus of hundreds of FINRA arbitration claims, with many investors complaining that they sustained huge losses because they were sold investments that were too risky for what they could afford.
Brokers for UBS (UBS), Banco Santander (BNC), and Banco Popular are among those identified as having made inappropriate recommendations to customers. A number of investors lost everything.
At Shepherd Smith Edwards and Kantas LTD LLP, our Puerto Rico muni bond fraud lawyers represent investors with FINRA arbitration claims that are seeking to recover their money. Contact our securities fraud law firm today to request your free case consultation.
Puerto Rico Electric Utility’s Late Accounts Surge 219% From ’12, Bloomberg, November 17, 2014
Read the FTI Capital Advisors Report
Puerto Rico's PREPA urged to get tough on $1.8 bln owed, Reuters, November 17, 2014
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Investors File Close to $1B of Puerto Rico Bond Fraud Claims against UBS, Stockbroker Fraud Blog, October 9, 2014
Fidelity, Schwab, and Pershing Suspend Trading of Schorsch Nontraded Real Estate Investment Trusts, Institutional Investor Securities Blog, November 13, 2014
Hedge Funds Are Moving in on Municipal Debt, Including Puerto Rico Debt, Institutional Investor Securities Blog, November 15, 2013