(Adds PREPA statement)
By Nick Brown and Megan Davies
NEW YORK, April 30 (Reuters) - Puerto Rico’s electric power authority, PREPA, struggling with $9 billion of debt, won agreement from creditors to extend a forbearance agreement by 35 days, according to statements by a key bondholder faction and PREPA.
Under the new agreement, which expires on June 4, PREPA has agreed to a June 1 deadline to provide creditors with a debt restructuring plan, said the group, which represents 40 percent of all PREPA bondholders.
“During the new forbearance period, PREPA will have the opportunity to provide information to its creditors and meet on a timely basis to discuss all the elements of a plan that will improve PREPA,” said the group, led by Franklin Advisers and OppenheimerFunds.
As part of the extension, PREPA has agreed to facilitate a meeting between business consultants Navigant and the forbearing creditors’ advisers by May 11 to discuss rate structuring, it said in a statement.
The utility has also engaged investment bank Goldman Sachs as a potential underwriter to structure a potential financing transaction, it said.
The forbearance agreement stops creditors from calling defaults during broader debt restructuring talks at PREPA, whose inefficient plants and bill collection problems are contributing to financial distress.
The Oppenheimer bondholder group last month proposed a $2 billion backstop commitment to modernize PREPA’s fleet, but PREPA’s chief restructuring officer, Lisa Donahue, said she was still analyzing the agency’s finances and would offer her own proposal later.
“The creditors’ agreement to an extended forbearance demonstrates that we are making progress and working together to find workable solutions for all stakeholders,” Donahue said in the statement.
Solving PREPA’s problems is key to repairing the economic picture in Puerto Rico, which has some $73 billion in total debt. Restructuring talks at PREPA have become strained of late, in part because the slide in oil and natural gas prices has emboldened bondholders to resist cuts to their debt.
Creditors have also voiced concerns that a big haircut at PREPA would set a precedent for similar tactics at other Puerto Rican agencies where financial reckonings may be in the offing.
Some Puerto Rican lawmakers have lent support to lobbying efforts in Washington to allow Puerto Rican agencies like PREPA to file for U.S. bankruptcy. The commonwealth’s top finance officials have said its government could shut down in three months because of a looming liquidity crisis.
Reporting by Nick Brown and Megan Davies; Editing by Leslie Adler and Alan Crosby