A deal to restructure Puerto Rico’s troubled power utility’s US$8.2 billion bond debt fell apart early on Saturday, after lawmakers missed a Friday midnight deadline to approve key conditions for the proposed bond swap, including putting a debt payment charge directly on customers’ bills.
The agreement reached with 70 percent of the Puerto Rico Electric Power Authority’s (PREPA) bondholders would have cut its debt by US$600 million and relaxed terms on more than US$700 million in debt payments in return for the more secure new bonds.
Officials warn the utility will run out of cash by summer without debt restructuring, possibly prompting power cuts.
Bondholders offered to extend the legislative deadline, but wanted to change terms of a US$115 million loan that would have provided liquidity to the company, but the firm found the new conditions unacceptable.
“We are disappointed that the [bondholder] group did not grant our requested extension. PREPA remains willing to continue discussions,” PREPA chief restructuring officer Lisa Donahue said.
She said bond insurers and bank lenders agreed to the extension without changing terms of the loan.
Representatives of the bondholders issued a statement describing the company’s stance as “extremely disappointing and perplexing,” but adding: “We continue to remain open to reaching a deal with PREPA and it is our sincere hope that they reconsider their position and assume postures beneficial to the people of Puerto Rico.”
Bondholders and company officials said they expected lawmakers to approve the legislation in the next few weeks.
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