- Forbearance contract deadline extended by one week to Oct. 22
- Prepa is seeking to restructure $8.3 billion of revenue debt
Puerto Rico’s main power provider won a seven-day extension from bondholders to negotiate how to restructure $8.3 billion of debt.
Bondholders with about 35 percent of the Puerto Rico Electric Power Authority’s debt and its fuel lenders decided to postpone until Oct. 22 the expiration of a forbearance agreement that was set to end Thursday, Lisa Donahue, the utility’s chief restructuring officer, said in a statement. The contract keeps debt restructuring talks out of court. This is the 10th extension since the parties first signed the accord in August 2014.
The utility, known as Prepa, is negotiating with bond insurers on how to ease the agency’s debt load and modernize a system that relies heavily on crude oil to produce electricity. Bondholders that are part of the forbearance and Prepa’s fuel lenders agreed last month to a tentative plan that would require investors to take a 15 percent loss in a debt exchange.
“Prepa continues to make significant progress in its transformation efforts and the extension of our forbearance agreements provides us additional time to work towards an agreement with all of our key creditors,” Donahue said. “We are working to accomplish a comprehensive transformation of Prepa that shares the burden among key stakeholders to address Prepa’s finances and to overhaul its operations to ensure that Puerto Rico has the energy infrastructure necessary to thrive for generations to come.”
A Prepa restructuring would be the largest-ever in the $3.7 trillion municipal-bond market. Puerto Rico and its agencies owe about $73 billion after years of borrowing to delay debt payments and fix budget shortfalls. Prepa’s restructuring is the first step toward Puerto Rico’s goal to lower its debt burden.
Prepa bonds maturing July 2037 traded Thursday at an average 60.5 cents on the dollar, up from an average 54.5 cents on Sept. 1, the last trading day before the utility said it had a potential agreement with bondholders, according to data compiled by Bloomberg.