By Dan Christensen, FloridaBulldog.org
When Gov. Rick Scott led a delegation of utility providers to Puerto Rico last year to help the hurricane-ravaged island, he also was protecting his investment.
The reason: the governor and his wife have untold millions of dollars invested in the commonwealth’s devastated electric company. The Scotts’ stake is via AG Superfund, a New York hedge fund which with other large investors issued $9 billion of credit to the government-run Puerto Rico Electric Power Authority, or PREPA. Those bond investors were enticed by the island’s lucrative tax breaks.
In July, Gov. Scott’s blind trust valued its AG Superfund holdings as worth between $1 million and $5 million. He also disclosed that four trusts and a family partnership in the name of First Lady Ann Scott valued their investments as being worth over $1 million each – meaning the Scotts’ total investment in AG Superfund is at least $5 million. (Republican Scott filed a lengthy financial disclosure form while running against incumbent Democrat Sen. Bill Nelson. Senate rules allow amounts to be disclosed by range.)
Gov. Scott does not comment on his financial affairs. Still, he has held on to his investment in AG Superfund throughout much of his time in office. His state financial disclosure forms show that as far back as 2013 Scott owned a $4.3 million stake in the fund that he put into a “blind trust” managed by a long-time business crony. That year, AG Superfund kicked off income to Scott of $209,000.
AG stands for Angelo, Gordon & Co., the multi-billion-dollar Wall Street investment firm whose “core” strategies include investing in “distressed debt.” New investors are required to invest at least $5 million in AG Superfund, whose stated objective “is to generate consistent, absolute returns through cash coupons, fees and when available equity co-investments, while minimizing the risk of loss.”
Records show that AG Superfund and seven other Angelo Gordon funds sank $321 million into PREPA revenue bonds, which were supposed to be paid back by the monthly charges paid by the island’s electric customers.
But in July 2017, burdened by poor rate collection and a lack of maintenance, PREPA filed for bankruptcy in federal court in Puerto Rico. Two months later, on Sept. 20, Hurricane Maria arrived with 155 miles-per-hour winds – shredding PREPA’s power grid and knocking out electricity to the island’s three million people.
Worthless bonds?
The prospect of a lengthy blackout and concurrent lack of revenue from the sale of electricity quickly sent chills through bondholders. Their $9 billion in PREPA bonds could be rendered worthless.
On Nov. 3, 2017, at the invitation of Gov. Ricardo Rossello, Scott led a delegation of Florida utility providers to Puerto Rico. The delegation included representatives from Florida power companies, including Duke Energy, Gulf Power and Florida Power & Light. According to a press release from the governor’s office, “delegation members joined local officials at a roundtable to offer advice and assistance regarding Puerto Rico’s decisions for ongoing power restoration efforts.”
In the months that followed, those utilities and many others sent crews to the island to get electricity up and running. In August, PREPA announced that restoration had been completed.
The U.S. reportedly spent more than $3 billion in the effort, with billions more said to be needed to solidify the still-fragile grid.
Also in those months, Scott made additional trips to the island, including after he announced his run for Nelson’s Senate seat. Florida has a large Puerto Rican population whose voters could be key to next month’s election.
Meanwhile, lawyers for PREPA’s creditors, including the Angelo Gordon funds, have been negotiating with Puerto Rico to try and restructure the utility’s massive debt in a way that would both protect investors and allow the island’s economy to recover. A tentative deal was reportedly reached over the summer, but so far nothing has been finalized.
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