The Financial Oversight and Management Board for Puerto Rico announced and publicly disclosed a mediation proposal to settle Puerto Rico Electric Power Authority debt held by non-settling bondholders, as part of efforts to end PREPA’s Title III bankruptcy. The June 1 proposal offers cash, new bonds, or a combination of both totaling USD 3 billion in exchange for releasing PREPA’s prepetition bond obligations. That would raise consideration for non-settling bondholders by about USD 1.4 billion versus the current Plan of Adjustment and increase recovery to about 35.4% of roughly USD 8.5 billion in petition-date claims, compared with about 19% under the current plan. The Board also said it is willing to negotiate a contingent value instrument tied to actual increases in PREPA net cash flow from power sales volumes above the projections in PREPA’s certified 2025 Fiscal Plan. Payments under that instrument would depend on both volumes and net cash flow exceeding projections. The source of any cash payment or debt service on new bonds has not been finally determined, and any new debt would be collateralized bonds with terms, including interest, still to be set. Existing agreements with fuel line lenders, unsecured creditors and some bondholders would remain in place, and if bondholders accept the proposal, total recovery for all non-pension creditors would be USD 4 billion against more than USD 10 billion of total debt covered by the PREPA Plan of Adjustment. The proposal was disclosed publicly after the Board said it was advised by the lead mediator that advisors to the bond parties were not recommending that clients become restricted from trading by receiving the offer. Mediation is continuing under the direction of the U.S. District Court for the District of Puerto Rico, and the Board said it will continue to evaluate options to reach a consensual resolution.
Financial Oversight & Management Board (Puerto Rico)2026-06-30
Financial Oversight and Management Board for Puerto Rico proposes USD 3 billion PREPA debt settlement lifting non-settling bondholder recovery to about 35%
The Financial Oversight and Management Board for Puerto Rico has proposed a USD 3 billion settlement for non-settling PREPA bondholders to help end the utility’s Title III bankruptcy. The offer would increase recovery on about USD 8.5 billion of claims to roughly 35.4%, up from about 19% under the current plan, and could also include a contingent value instrument tied to net cash flow gains above 2025 Fiscal Plan projections. Existing creditor settlements would remain in place while mediation continues.