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UPDATE 2-Puerto Rico PREPA's declines offer for fresh debt deal deadline
January 22, 2016 / 10:28 PM / 2 years ago

UPDATE 2-Puerto Rico PREPA's declines offer for fresh debt deal deadline

(Releads with with PREPA and bondholder group’s statements)

By Nick Brown and Megan Davies

SAN JUAN/NEW YORK, Jan 22 (Reuters) - Chances of Puerto Rico’s power utility PREPA reaching a deal with creditors to restructure its $8 billion debt were cast in uncertainty on Friday as one deadline passed and the utility baulked at the new terms offered for a new one.

Puerto Rican lawmakers’ failure to vote by Friday on legislation needed to make the restructuring deal work prompted a group of bondholders to offer to extend the deadline until Feb. 12, but PREPA rejected the changed terms.

“We are disappointed that the ... group did not grant our requested extension,” Lisa Donahue, PREPA’s chief restructuring officer, said in a statement. “PREPA remains willing to continue discussions with the Ad Hoc Group and other stakeholders.”

As the Friday deadline passed, the bondholder group issued a statement describing PREPA’s refusal as “extremely disappointing and perplexing”.

Pressure is mounting to secure a deal at PREPA, as the U.S. Supreme Court is slated to hear an appeal later this year in a case that could allow Puerto Rico to push PREPA into bankruptcy, an outcome creditors dread.

Reaching a deal to restructure PREPA’s debt is seen as key to fixing the debt-ridden U.S. territory’s finances.

Needing to restructure debts totalling $70 billion, the island’s leaders want U.S. Congress to allow it access to U.S. bankruptcy law or some form of court-sanctioned debt restructuring process.

PREPA said in December that it had reached a deal with 70 percent of all creditors, under which the bondholders agreed to accept 15 percent cuts to repayments in exchange for new bonds with higher ratings.

For that to work, Puerto Rico needs to pass legislation enabling PREPA to create a new charge on customer invoices specifically to pay the debt, so that the new bonds could earn the higher ratings that creditors expect.

As part of their proposed extension, bondholders were also offering to provide $115 million of additional capital.

However, PREPA said the bondholders changed the terms of that offer, conditioning it on regulatory approval by Puerto Rico’s energy commission for the imposition of the additional charges to customers.

Without a restructuring deal in place, the matter could devolve into litigation.

Reporting by Megan Davies and Nick Brown; Editing by Meredith Mazzilli and Simon Cameron-Moore

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