Puerto Rico’s electric utility can avoid a debt restructuring if it accepts a creditor plan that includes a $2 billion cash injection to stabilize the agency, Marathon Asset Management’s chief executive officer said.
Bruce Richards, who also is the hedge-fund firm’s co-founder, spoke on Thursday as creditors were said to be meeting to discuss how to deal with the junk-rated utility’s $9 billion of borrowings. Richards and Tom Wagner, the co-founding partner of Knighthead Capital Management said last month that they and other creditors would fund investment in the power authority and didn’t need to offer principal reductions on the debt they hold.
“Marathon maintains a position that it does not require restructuring, that it’s a very valuable asset company, if it’s a bit more efficient” and if it “built its own power plants on the island,” Richards said in a telephone interview.
Marathon, which manages about $12 billion and invests in distressed debt, is part of a group of hedge funds and other owners of Puerto Rico Electric Power Authority bonds. Creditors were set to meet with commonwealth officials in New York to negotiate a plan to restructure the public utility’s more than $8 billion of municipal-bond obligations, a person with knowledge of the matter said Tuesday.
The two sides have been trying to come to an agreement for 10 months as Puerto Rico struggles under the burden of $72 billion of debt issued by the commonwealth and its agencies. Prepa requires “a combination of debt and equity to build a physical plant,” Richards said. “Marathon, along with its creditor group, stands prepared to provide that funding and is in it for the long run.”
The creditor group filed its latest debt-workout proposal last week that gives a more favorable outcome for bondholders than the plan Prepa’s restructuring officials recommended on June 1, the person said Tuesday. Creditors had offered a proposal in April that planned to inject $2 billion into the junk-rated utility to modernize facilities and stabilize its finances.
Prepa is “a very fine company” that needs capital “in order to make advancements that puts it in a very good position,” Richards said Thursday.
New York-based Marathon owns “a substantial position” in Prepa debt, Richards said in an interview on Bloomberg Television on May 6.