(Adds trading details, background, quote from authority’s executive director)
July 7 (Reuters) - Puerto Rico Electric Power Authority, or PREPA, on Monday said the lenders providing it revolving lines of credit have agreed to allow it to delay until July 31 certain payments currently due following a series of ratings downgrades and other recent events that have raised concerns about its financial condition.
PREPA said it will use that period to continue talks with creditors and evaluate alternatives to improve its financial condition. During that period, all payments owed to employees and suppliers will continue as normal.
The authority’s $250 million line of credit from Citibank has already expired, and its $550 million line of credit from ScotiaBank de Puerto Rico expires next month. It’s on the hook for at least $671 million through the end of August - $146 million to Citi and $525 million to ScotiaBank.
Prices on PREPA’s 5.25 percent bonds due July 2040 weakened to less than 37 cents on the dollar from Thursday’s closing price of 40 cents on the dollar.
Another PREPA bond, with a 5 percent coupon maturing in 2026 , touched a yield of 17.637 percent in intraday trading on Monday, its highest yield ever since it was issued in 2010 and more than 7 percentage points above its previous high of 10.582 percent on Feb. 20.
The last time that bond traded, a day after Puerto Rico’s $3.5 billion general obligation bond sale on March 17, its highest yield was 9.872 and the lowest price was 65.75 cents on the dollar.
On July 1, PREPA creditors got a slight respite when the bonds’ trustee made a scheduled payment. But the U.S. municipal bond market remained worried PREPA will soon use a new bankruptcy-like process to restructure its debts.
The law establishing the process has rattled the $3.7 trillion municipal market since it was passed by Puerto Rico’s legislature in late June and has since prompted Moody’s Investors Service to push ratings on Puerto Rico debt deeper into junk territory.
In addition to cutting its rating on $14.4 billion of the island’s general obligation bonds to B2 on July 1, Moody’s also cut its ratings on Puerto Rico’s agencies and public corporations, affecting an additional $46 billion of bonds.
“While PREPA faces certain financial challenges today, we are working hard to improve operations, strengthen service and modernize our infrastructure, so we can deliver cleaner and more reliable energy to our customers,” PREPA executive director Juan Alicea Flores said in a statement.
PREPA representatives said they could not immediately provide additional details on Monday. Citi declined to comment, and ScotiaBank said it was not immediately able to comment. (Reporting by Dan Burns; Additional reporting by Hilary Russ and Edward Krudy in New York; Editing by Phil Berlowitz)