Puerto Rico Power Utility Gets Debt Restructuring Extensionby
Prepa postpones bond-purchase agreement with creditors
Power utility plan would restructure $9 billion of debt
Puerto Rico’s main electricity provider will prolong a bond-purchase agreement with its creditors, averting a potential termination of a larger debt-restructuring deal.
The Puerto Rico Electric Power Authority and its creditors will extend the accord to the end of May 2, according to a statement Thursday from the utility. Under the pact, bondholders and insurance companies agree to buy $111 million of three-year bonds from Prepa, as the utility is known. The contract expired late Wednesday and is part of Prepa’s plan to restructure $9 billion of debt. The larger restructuring pact would end if the bond-purchase agreement failed to continue.
The utility, hedge funds, bond-insurers, and mutual funds reached the debt-restructuring accord in December. It allowed Prepa to avoid defaulting Jan. 1 on a $196 million interest payment, with bondholders and insurers agreeing to purchase the three-year bonds to free up cash for the utility. Creditors have been reluctant to lend Prepa money since Governor Alejandro Garcia Padilla signed a debt-moratorium law on April 6 that allows him to skip principal and interest payments to pay for essential services instead.
Puerto Rico’s House of Representatives passed a bill on April 18 that would exempt certain debt, including Prepa’s restructuring bonds, from the moratorium. The Senate Tuesday failed to vote on that bill. The next voting session is Monday at 1:00 p.m.
The $111 million of bonds will carry a 10 percent coupon and mature July 2019.
The $9 billion debt-restructuring plan will reduce Prepa’s debt load by $600 million and offer debt-service relief for five years of more than $700 million. Bondholders would take a 15 percent loss on their securities in return for bonds repaid with a new customer fee, called a securitization charge. The island’s energy commission is reviewing that proposed fee.