Loan payment delayed
Puerto Rico's financially struggling public power company won a big reprieve Thursday, announcing that creditors agreed to postpone payment of US$671 million worth of bank loans until next year.
It was the third time this year that creditors allowed the state-owned Electric Power Authority, known as PREPA, to delay payments amid growing speculation that it might default on its roughly US$9 billion debt.
The power company owes a Scotiabank consortium US$525 million and Citigroup US$146 million, and now has until March 31 to make those payments. The banks will continue to collect interest on those amounts.
"Today's agreements give PREPA the additional time and financial resources we need to reach a comprehensive solution that ensures our ability to provide a safe, reliable and efficient power supply to all Puerto Ricans for many years to come," said Juan Alicea, executive director of the power company.
The credit lines allow the power company to buy oil and keep lights on across the US territory. The agreement also will allow the agency to use US$280 million from its construction fund to pay for current expenses and capital improvements.
As part of the agreement with creditors, the Electric Power Authority has to submit a full debt restructuring plan by March 2. It also has to appoint a chief restructuring officer by Sept. 8 and submit a five-year business plan by December 15.
Those requirements indicate the power company will seek to restructure all its debt through negotiations with its creditors, said David Tawil, co-founder and portfolio manager of New York-based Maglan Capital.
Many analysts believed the Electric Power Authority would be the first state-owned business to embrace a new law that allows certain of Puerto Rico's public corporations to restructure their debt by turning to the courts.