NEW YORK, April 1 (Reuters) - Puerto Rico’s debt-laden electric power utility said on Wednesday it was concerned that creditors had made public their offer to provide $2 billion in new financing, calling the disclosure potentially misleading and saying it had expressed doubts about parts of their plans.
The Puerto Rico Electric Power Authority (PREPA), in talks with its bondholders to restructure its $9 billion in debt, added that the disclosure was partial, it had not had time to review the plan, and was seeking more information about the assumptions about it.
An ad hoc group of PREPA’s creditors, including OppenheimerFunds and Franklin Templeton, have offered $2 billion to finance a turnaround, $1.2 billion of which would fund a new natural gas facility - a plan first reported by Reuters on Saturday.
The new financing could stave off a messy default that would reverberate around the U.S. municipal bond market, and allow the utility to modernize its business, a key element in fixing Puerto Rico’s ailing economy.
“While we appreciate that the bondholders’ have produced a plan that recognizes our need to be in regulatory compliance we remain convinced that a public airing of only certain aspects of the substance or merits of the bondholder plan at this point is premature and could be misleading,” PREPA’s Chief Restructuring Officer Lisa Donahue said in the statement.
The authority said it would not comment further on the substantive elements of the plan. Negotiations up until now have taken place behind closed doors with limited public comment and PREPA’s statement is the first glimpse of friction between it and its creditors.
Bondholders, which also include big hedge funds Blue Mountain Capital and Appaloosa Management, entered into a forbearance agreement - a form of payment relief that stops a creditor from declaring a debtor in default to give it time to repay delinquent sums - with PREPA in August last year.
That agreement, which contains a confidentiality clause, expired at midnight on Tuesday but was extended for another 15 days to allow more time for negotiations.
The authority needs to pay bondholders around $400 million on July 1 and could be forced into insolvency if no deal is reached. (Reporting by Edward Krudy; Editing by Edwina Gibbs)