Puerto Rico's Aqueduct and Sewer Authority has been given an approval to issue new bonds in order to avoid the rate hike. The country's House of Representatives approved the bill on Thursday.
The bipartisan house voted 35 to 10 after having 400 amendments. The bill is now on its way to the US senate, according to Michelle Gonzalez, spokeswoman of House Speaker Jaime Perello. Rafael "Tito' Hernandez said the new legislation will allow PRASA to create a new corporation in order to sell security bonds that will be backed by a revenue that will automatically repay PRASA's debt, as reported by Bloomberg
Puerto Rico is still trying to figure out how it will pay its $70 billion debt load in the middle of the country's increasing poverty rate and stagnant economy. According to Reuters, the US Congress is also findingways in order to help the island resolve its crisis between its creditors.
The agency already has a debt of $4.5 billion to its bondholders and a number of suspended ongoing projects because of its difficulties in accessing the bond market. According to the Daily News, the agency already warned its bondholders that it may redirect its funds to pay contractors rather than pay its utility debts if the proposed security bond will not succeed.
A similar scenario also happened in Puerto Rico's power utility PREPA where lawmakers also passed the same securitization structure last February. PREPA also owes $8.3 billion in debt but unlike PRASA, it had a consensual restructuring which was was agreed upon by most of its creditors after 18 months of continuous talks.
An expert analyst at Height Securities said the proposed legislation for PRASA was not carefully crafted with stakeholder buy-in. The US Congress though will assign a federal board to oversee Puerto Rico's finances amidst its uncertainty of bankruptcy protection.
