Puerto Rico to Offer Universal Debt Exchange Plan to Creditorsby
Government Development Bank met with investors in New York
Commonwealth wants voluntary debt exchange with debt holders
Puerto Rico plans to present creditors with a universal debt-exchange proposal that would allow bondholders owning securities with various repayment priorities to swap their debt for a single new bond.
The island’s Government Development Bank outlined the proposal in a meeting Friday in New York with advisers of the commonwealth’s major bondholders, according to Barbara Morgan, an outside spokeswoman for the agency. There will probably be a consolidation of repayment sources to pay off the new debt, she said.
As Puerto Rico faces debt payments in less than two weeks, the bank and its advisers are seeking to present an acceptable transaction proposal to the creditors, which hold general obligations and sales-tax bonds issued by the bank and the island. The meeting wasn’t open to the public. Attendees signed non-disclosure agreements.
The bank had already provided advisers to the bondholder groups with information through in-person meetings and an electronic data room, according to a statement Thursday. The commonwealth unveiled a fiscal and economic growth plan on Sept. 9 that included a debt-restructuring proposal.
Investors are watching to see if Puerto Rico will pay $467 million due Dec. 1, its biggest obligation since August, and then $958 million owed on Jan. 1. The island defaulted for the first time on appropriation bonds from its Public Finance Corp. in August. The commonwealth is struggling under a $70 billion debt load.
Separately, creditors of Puerto Rico’s main electricity provider gave the utility more time to negotiate with insurers that guarantee a portion of its debt against default. The Puerto Rico Electric Power Authority, known as Prepa, is trying to restructure $8.2 billion of debt to reduce its costs and free up cash for plant upgrades.
Investors holding about 35 percent of the Prepa debt agreed on Nov. 5 to take losses of as much as 15 percent by exchanging their bonds for new securities. The deal was set to lapse Friday if Prepa couldn’t win the support from companies that insure about $2.5 billion of the utility’s debt. The new deadline is Dec. 10, said Jose Echevarria, a spokesman for the utility in San Juan.