MBIA Inc. subsidiary National Public Finance Guarantee Corp. has agreed to join the restructuring support agreement struck by the Puerto Rico Electric Power Authority with bondholders and other parties.
The agreement seeks to provide a framework to resolve the treatment of the subsidiary's insured PREPA revenue bonds in PREPA's recovery plan. If the deal is closed, PREPA's revenue bonds will be exchanged into new securitization bonds issued by a special purpose corporation and secured by a segregated transition charge assessed on electricity bills.
Completion of the transaction is subject to approval by the Title III Court, support of a minimum of 67% of voting bondholders for a plan of adjustment and confirmation of the plan by the court and execution of acceptable documentation and legal opinions.
MBIA CEO William Fallon previously opposed the agreement, saying it suggested a revenue deal with the secured lien that would have a loss in excess of 20%. Fallon also said the agreement does not do enough to improve the operational financial performance of PREPA to the benefit of all parties, including the utility's customers.
National Public Finance and MBIA Insurance Corp. also sued a number of major Wall Street banks for their alleged inequitable conduct in Puerto Rico's municipal market.
