When last we checked in on Puerto Rico’s seemingly intractable debt debacle, Governor Alejandro Garcia Padilla was pandering to Congress in an ill-fated attempt to secure some manner of federal intervention that would help to alleviate the strain on the island’s finances. 

Meanwhile, the commonwealth avoided a messy default on $273 million in GO debt by using an absurd revenue clawback end-around to make a $354 million payment on December 1. 

On Friday, we get the latest out of Puerto Rico and the news is … well, good we suppose. PREPA – Puerto Rico’s power authority – has reached a restructuring agreement with bondholders and insurers to refinance some $8.2 billion in debt via securitization. 

As Bloomberg reports, “ad hoc creditors will take 15c haircut on bonds and bond insurers will put up $450m surety bond.”

As WSJ noted last week, “bondholders and lenders agreed three months ago to accept losses of 15% as part of an agreement to swap old Puerto Rico Electric Power Authority debt for new bonds with more protections [but] MBIA Inc. and Assured Guaranty [were] worried about the implications for other Puerto Rico debt and haven’t signed on.”

In short, “bond insurers can’t sell their risk and don’t want to set a precedent in which a utility, which could raise rates to pay debt, restructures instead.”

As part of today’s deal, “the monolines will provide an equity component that will offer about $450 million in the event of a default,” Bloomberg writes adding that “the tentative agreement sets into motion what would be the largest-ever restructuring in the $3.7 trillion municipal-bond market and potentially avert a default on $196 million of interest due Jan. 1.”

Friday’s deal appears to have come as a relief to investors as both insurers are rallying hard.

The deal purportedly will knock $700 million off the utility’s debt service burden as well as reduce PREPA’s principal owed by $600 million.