Puerto Rico Power Debt Highest Since June With AlixPartners HireMichelle Kaske
Prices on junk-rated Puerto Rico electric bonds reached a three-month high after the utility picked turnaround firm AlixPartners LLP to bolster its operations.
Puerto Rico Electric Power Authority bonds maturing in July 2042 traded at an average price of 57.88 cents on the dollar today, the highest since June 5, data compiled by Bloomberg show. The debt fell as low as 38.49 cents July 2.
The utility, called Prepa, last week selected Lisa Donahue, managing director at New York-based AlixPartners, as the power agency’s chief restructuring officer to reduce expenses and boost its finances. The island’s main supplier of electricity has struggled with limited cash, multiple credit-rating downgrades and $8.6 billion of debt.
The hiring “will over time add some clarity as to the direction that Prepa will take, said Michael Taylor, senior analyst for munis at Boston-based Columbia Management Investment Advisers LLC, which oversees about $30 billion of state and local debt.
Banks that lend to Prepa so it can buy fuel agreed last month to lengthen lines of credit through March. That’s also propelling the debt gains, Taylor said. In return for the loan extension, Prepa must create a five-year business strategy by Dec. 15 and a debt-restructuring plan by March 2.
If Prepa restructures its debt, it would be the largest ever in the $3.7 trillion municipal-bond market. After prices dropped to record lows in July, the latest prices reflect what investors would receive in a restructuring, Taylor said.
‘‘The bonds are trading at or near expected recovery levels,’’ Taylor said.