Puerto Rico Electric Power Authority, also known as PREPA, reached a deal with creditors to make a $416 million payment Wednesday. (Tweet This)
The deal between the involved parties also extends the forbearance pact, which was set to expire Tuesday until Sept. 15. During this period, bondholders "will continue to collaborate with PREPA towards a comprehensive plan that will sustainably improve PREPA," the group of bondholders in the utility said in a statement.
PREPA also said certain insurers of its power revenue bonds agreed to buy $128 million new short-term bridge bonds, according to Reuters. These short-term bonds are scheduled to be paid by Dec. 15.
"We remain focused on working with PREPA and its professionals to refine a long-term plan that is in the best interest of all stakeholders. Over the past several months of direct negotiations with PREPA and the [Government Development Bank for Puerto Rico], we have made progress towards a workable solution for PREPA, and are hopeful that we have established a foundation for reaching an equitable deal for all PREPA stakeholders, which will help the island in its revitalization," said Stephen Spencer, financial advisor to PREPA bondholders group.
Nevertheless, Puerto Rican debt issuers owe a total of about $2 billion, including the PREPA payment, by end-of-day Wednesday. Approximately $600 million in general obligation bonds is also expected to be paid.
Also, municipal bond researchers at Franklin Templeton said following the announcement that a "long and costly" legal fight looms as the situation progresses.
"At the very least, in our assessment, Puerto Rico can expect creditors to seek legal affirmation and protection of contractual rights," Rafael and Sheila Amoroso, co-directors of the municipal bond department at Franklin Templeton, said in a report. "Unfortunately, we think it will likely be a long and costly battle regardless of the outcome."
The territory's debt situation came under a microscope after Gov. Alejandro García Padilla said Puerto Rico's $72 billion debt is simply unpayable.
The debt has been very popular among investors because of its triple-tax exempt status.
In a Monday night address, García Padilla urged Congress to change the U.S. Bankruptcy Code and make it possible for Puerto Rico's municipalities and instrumentalities to file for bankruptcy under Chapter 9. Puerto Rico cannot file for bankruptcy under Chapter 9 because it is not a state.
On Tuesday, New York Sen. Chuck Schumer said he and Connecticut Sen. Richard Blumenthal would sponsor a bill that would allow Puerto Rico's instrumentalities to file for Chapter 9, according to Bloomberg.
The bill would serve as a companion to HR 870, which was introduced in the House in February by Puerto Rico's representative in Congress, Pedro Pierluisi, to change the bankruptcy code.
—CNBC's Kate Kelly and Reuters contributed to this report.