PREPA, Bondholders Wrangle Over Forbearance

With the forbearance agreement between Puerto Rico Electric Power Authority and its bondholders scheduled to elapse in hours, the two sides were arguing Wednesday about how the agreement should be continued.

PREPA agreed to three separate forbearance agreements in August 2014 that were to elapse at the end of March. The agreements were with banks, bondholders/insurers, and the Government Development Bank for Puerto Rico. At the end of March these three agreed to extend the agreements by 15 days to the end of Wednesday, April 15.

On Tuesday at 7:37 a.m. Eastern Standard Time a group representing the forbearing bondholders, though not the forbearing bond insurers, said it was offering a 30-day extension of the forbearance agreement. At 4:30 p.m. Tuesday PREPA sent out a release saying that the bondholder release had been sent out without advanced notice to PREPA and that it left out "material details." PREPA said the statement was on behalf only some of the forbearing bondholders.

At 7:27 p.m. Tuesday PREPA said it was proposing a 15 day extension to the bondholders.

PREPA said the bondholders' proposed extension "would have required PREPA to set aside $122.5 million from its debt service reserve fund and also pay a $1 million amendment fee to the forbearing bondholders. In addition, PREPA would have been required to work on a plan to pay the bondholders' obligations, and to appoint a third-party monitor to review and process the bondholders' information requests and publish confidential information that would allow the forbearing bondholders to buy and sell PREPA bonds. The bondholders' proposal included several blanks, open items and other terms that could not be negotiated in less than one day."

The third party monitor would duplicate existing efforts at additional costs, PREPA said.

"PREPA remains committed to working collaboratively with its creditors and is optimistic that a consensual resolution can be reached," Lisa Donahue, PREPA's chief restructuring officer, said in the authority's statement.

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Puerto Rico
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