Puerto Rico Electric Wins Extension of Debt Restructuring Pactby
Creditors give utility until Dec. 10 to continue negotiations
Prepa remains in talks with bond insurers on debt exchange
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 its debt on Nov. 5 agreed 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.
Bondholders extended preliminary talks 13 times previously in the past year.
Puerto Rico Governor Alejandro Garcia Padilla will convene an extraordinary session of the commonwealth’s legislature in the first week of December after lawmakers failed this week to address a bill he recommended that would authorize the restructuring of the utility. Under the tentative Prepa restructuring agreement, creditors could void the pact if the commonwealth’s legislature didn’t sign off on the plan by Friday.
The restructuring would be the largest ever in the $3.7 trillion municipal-bond market and mark a first step by Puerto Rico to reduce a $70 billion debt load that Padilla says the island can’t afford to pay.