The Puerto Rico Electric Power Authority, the struggling island’s main supplier of electricity, has agreed with creditors to delay repayment of bank loans until Aug. 14, according to the utility.
The agency, called Prepa, uses the lines of credit to buy fuel. It was scheduled to repay $146 million to Citibank today. An additional $525 million is due Aug. 14 to a syndicate of banks led by Scotiabank de Puerto Rico, which is serving as administrative agent. Prepa, which has $8.6 billion of debt, is also having “productive discussions” with firms owning or insuring more than 60 percent of its bonds, Juan Alicea Flores, Prepa’s executive director, said in a statement.
“This latest show of support from our bondholders and lenders provides us with additional time to evaluate all available options to ensure we are reaching the best possible outcome for our employees, customers, creditors and suppliers,” Alicea Flores said in the statement.
Prepa may become the first public corporation to utilize Puerto Rico’s new debt-restructuring law to help reduce its obligations. Fitch Ratings June 26 cut Prepa to CC, its third-lowest speculative grade, citing a probable debt restructuring or default. Standard & Poor’s today cut Prepa two levels to CCC, eight steps below investment grade, saying the debt “is vulnerable to nonpayment.”
Uninsured Prepa bonds maturing in July 2042 traded today at an average price of 47.25 cents on the dollar, compared with 54.82 cents on June 24, the day before Governor Alejandro Garcia Padilla proposed the debt-restructuring bill, data compiled by Bloomberg show. The bonds traded at 38.49 cents on July 2, a record low.
The utility must repay about $214 million to bondholders on Jan. 1, according to New York-based advisory firm NewOak. Prepa will default on that payment, according to Concord, Massachusetts-based Municipal Market Advisors.
Prepa has limited cash. It used $41.6 million from reserves to pay bondholders $417.6 million on July 1 after raiding $100 million from its capital fund in May to buy fuel.
Robert Julavits, a spokesman for New York-based Citigroup Inc. (C), declined to comment.
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