Puerto Rico’s cash-strapped power utility extended through June 4 an agreement that’s kept creditors from pushing it into default on $8.6 billion of bonds.
The Electric Power Authority’s debt investors, insurance companies and banks will give it more time to negotiate toward a plan to restructure its obligations, the bondholders said in a statement Thursday as the agreement was set to expire.
“The extensions will likely have to continue through the end of the summer,” Lisa Donahue, the utility’s chief restructuring officer, said at a Puerto Rico Manufacturers Association conference Thursday. “It will take time for the bondholders to digest the plan.”
The authority, known as Prepa, is veering toward the largest restructuring ever in the municipal market.
Prepa debt joined a selloff in the commonwealth’s securities Thursday after lawmakers in the island’s House of Representatives rejected a plan to revamp its tax system. The junk-rated island is groaning under $73 billion of debt.
Electric Power Authority bonds maturing in July 2040 traded Thursday at an average of about 53.38 cents on the dollar, the lowest since March 31, according to data compiled by Bloomberg. Standard & Poor’s rates the securities CCC-, nine levels below investment grade, with a negative outlook.
Thursday’s extension was the third since Prepa signed an agreement in August with creditors.
Under the latest pact, Prepa agreed to provide a plan for repairing its finances by June 1, bondholders said in the statement. The agency said it has engaged Goldman Sachs Group Inc. as a potential underwriter on a possible financing.