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UPDATE 2-Puerto Rico utility PREPA extends creditor agreement by one week
October 15, 2015 / 10:29 PM / 2 years ago

UPDATE 2-Puerto Rico utility PREPA extends creditor agreement by one week

(Adds details from sources)

By Megan Davies

NEW YORK, Oct 15 (Reuters) - Puerto Rico’s electric power authority, PREPA, has extended by one week a creditor agreement with its bondholders and lenders that was to expire at the close of Thursday, while it is continuing to try to negotiate with bond insurers who are holding out on a deal.

Reducing PREPA’s $9 billion in debt has been seen as a critical test for the U.S. territory as it tries to forge a broader restructuring of $72 billion in total debt.

PREPA in September agreed to deals with the bondholder group and its lenders for those creditors to take a 15 percent reduction on their principal.

Puerto Rico has not yet reached a deal with the insurers of those bonds and those insurers also refused to sign a forbearance agreement - which bars creditors from calling defaults and filing lawsuits. Those bond insurers included National Public Finance Guarantee Corporation (NPFG), a unit of MBIA, and Assured Guaranty.

A source familiar with the talks said earlier in the week that the insurers had been creative in trying to come up with solutions for a deal, however, if there is no progress made with PREPA they may ultimately move to calling for a receiver to take over management of the utility.

A separate source familiar with the situation said that PREPA and the insurers could make progress and get to an agreement, however, there were also a number of alternative strategies that could get the deal done without all of the bond insurers being on board.

The sources could not be identified because the discussions are confidential.

PREPA said it agreed the extension of the forbearance agreement with the bondholders and lenders from Oct. 15 to Oct. 22.

“PREPA continues to make significant progress in its transformation efforts and the extension of our forbearance agreements provides us additional time to work towards an agreement with all of our key creditors,” said Lisa Donahue, PREPA’s Chief Restructuring Officer, in a statement. (Reporting by Megan Davies)

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