Key Step in San Bernardino; Puerto Rico beats its deadline

August 15, 2014

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Progress in San Bernardino. The City of San Bernardino and the San Bernardino Police Officers Association (SBPOA) last evening announced to U.S. Bankruptcy Judge Meredith Jury that they have reached a tentative long-term agreement. The terms of the agreement are confidential and subject to the gag order imposed by Judge Jury, a development which Mayor Carey Davis. Chief of staff Michael McKinney noted “is an important step forward towards emerging from bankruptcy,” adding that it would bring “long-term stability for the San Bernardino Police Officers Association members and the city.” Ward 5 Councilman Henry Nickel said the police officers’ contract “is the biggest piece of the pie next to CalPERS (the California Public Employees’ Retirement System),” noting that San Bernardino’s bankruptcy emergence strategy has been to work on the “most complex aspects first.” Last night’s agreement is subject to approval by both the City Council and the police union’s members—with the city council set to consider it at a closed door session Monday.

Buying Tiempo. The Puerto Rico Electric Power Authority or PREPA reached an 11th hour agreement with its creditors prior to last midnight’s deadline, releasing a statement saying it’s reached an agreement with creditors to further extend its credit and that it has committed to appointing a chief restructuring officer by Sept. 8th. PREPA’s released statement said the agreements reached yesterday “provide PREPA with a consensual path forward to improve its operations and financial situation,” and will enable the authority to use some $280 million held in its construction fund for payment of current expenses and capital improvements. In addition, the Authority stated that insurers and bondholders controlling more than 60 percent of PREPA’s outstanding bonds have agreed to amend existing bond documents to provide PREPA with liquidity and time to “develop a plan to achieve a restructuring of its business:” the insurers and bondholders will not exercise remedies against PREPA during the term of these agreements, and PREPA will continue to make required debt service payments in full. Further, the authority reported that the banks that provide revolving lines of credit will extend until next March 31st agreements to not exercise remedies as a result of credit downgrades. PREPA will continue to delay certain payments that were due to these lenders in July and August. PREPA said it will file a notice today on the Electronic Municipal Market Access (EMMA) system outlining the key terms of its agreements with the creditor groups.

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