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PRASA deal on federal debt said to be mixed news for bondholders

PRASA has been in default on these loans for years, said Matt Fabian, partner at Municipal Market Analytics.

Though the debt will be made “senior” equal to senior bonds, the senior debt service reserve account shall only secure the authority’s bonds.

In some ways the deal is step backward for bondholders in so far as it elevates the federal debt to the same level as the bond debt, Fabian said.

However, some bondholders may welcome it as a step in the right direction by bringing the restructuring of PRASA’s bonds closer, Fabian said. For many Puerto Rico bondholders, advancing the day when they can sell their newly restructured bonds is an important goal, he said. There has been an active audience for buying restructured Puerto Rico bonds.

Tim Holler