Puerto Rico’s junk-rated power utility said it won an extension to June 30 on the forbearance agreement that has kept its negotiations with creditors out of court.
The accord between the Puerto Rico Electric Power Authority and debtholders, bond insurers and banks was set to expire Thursday at about midnight. This is the fifth extension since the group first signed the agreement in August.
The power provider, called Prepa, faces a $416 million debt-service payment July 1 and is saddled with $9 billion of debt.
“We are actively engaged in discussions and look forward to continuing these discussions over the next few weeks,” Lisa Donahue, the utility’s chief restructuring officer, said in an e-mailed statement Thursday.
No decision has been made about the July 1 obligation and there can be no assurance that the payment will be made, Donahue said in a June 3 e-mail.
The trustee for the securities told the bond insurers that debt reserves are short about $150 million, according to a person with direct knowledge of the matter who requested anonymity because the talks are private. Insurers cover most of the bonds maturing that day, data compiled by Bloomberg show.
The bond trustee, U.S. Bank, is also due some of the reserves. The company is entitled to be repaid fees from trust funds prior to repayment of principal and interest on the bonds, the trustee said in a June 15 filing.
Investors and bond insurers have tentatively agreed on a proposal for how they’d be willing to alter terms on the authority’s existing securities, according to a person with direct knowledge of the discussions.
Suspending principal and interest payments or asking bondholders to reduce the amount owed would help Prepa as it seeks to modernize a system that relies mostly on petroleum to produce electricity.
Obligations of the utility that mature in July 2042 traded Thursday at an average price of 54.6 cents on the dollar, the highest since June 2, according to data compiled by Bloomberg.