A group of investors that hold the bonds of Puerto Rico’s water utility have hired investment bank Greenhill & Co. to help negotiate terms for a new financing, according to two people with knowledge of the matter.
The investors have discussed a plan that would create new senior debt for the Puerto Rico Aqueduct & Sewer Authority that is given higher priority than other agency borrowings, said the people, who asked not to be named because the information is private. The bondholders may use a partial debt restructuring as a condition for backing the deal, the people said.
The investors are seeking to inject fresh capital into the struggling water utility, known by the Spanish acronym Prasa, because it failed to sell $750 million of bonds with an average interest rate of 10 percent in August and September, the people said.
Victor Suarez, the chief of staff for Puerto Rico’s governor, said in August that the water utility wouldn’t need to restructure its debt if it can access the market on “reasonable terms” and for sufficient amounts to cover its capital needs.
Norma Munoz, spokeswoman for Prasa in San Juan, didn’t immediately respond to e-mail and phone messages. Jeffrey Taufield, a spokesman for Greenhill at Kekst & Co., declined to comment.
Prasa already has had to offer generous terms on what it’s borrowed since the failed bond sale. It will pay 8.75 percent interest on $75 million of short-term notes due Nov. 30 that it sold to Bank of America Corp., the lead underwriter of the failed bond sale, a utility spokeswoman said last month. Proceeds from those notes were used to refinance most of a $90 million loan from Banco Popular de Puerto Rico.
The water agency’s $1.8 billion of 5.25 percent bonds due July 2042 last traded Friday at an average price of 66.3 cents on the dollar, the highest since Sept. 30 and up roughly two cents from Thursday.
Faced with the possibility that the island’s cash will run dry by the end of the year, Puerto Rico officials have begun talks with some holders of its $73 billion of obligations. Officials of the U.S. territory have been in negotiations since last month with hedge funds that own debt issued by the island’s development bank on a plan to restructure the credit and raise between $750 million and $900 million of additional capital, people with knowledge of the matter said earlier.