PREPA Borrows $264 Million to Avoid Friday Default

The Puerto Rico Electric Power Authority said it is borrowing $264 million to avoid a default on Friday.

As part of its continuing negotiations with its creditors, some of the creditors agreed to lend the money and to extend the coverage of the Restructuring Support Agreement governing the authority's restructuring to Dec. 15.

The bonds the authority purchased today have a blended interest rate of 8.46% and maturities from four to six years, PREPA said in a statement Thursday.

According to documents PREPA posted to the Electronic Municipal Marketplace Access web site, National Public Finance Guarantee will purchase $104.6 million, Syncora will purchase $38.5 million, Assured will purchase $25.8 million, and certain unspecified creditors will purchase $94.8 million in bonds.

The deal will allow PREPA to pay all $415 million in principal and interest due on July 1. The authority will get $146.4 million from its General Fund, Construction Fund and/or excess amounts in its Build America Bonds account. It will get $3.4 million from a BABs federal subsidy interest payment and $1.9 million from a 2013 capitalized interest account.

PREPA's $415 million payment is part of the $1.9 billion of Puerto Rico debt coming due on Friday, two days after the U.S. Senate approved a bill to help the territory restructure its obligations. The bill imposes a stay on litigation over bond payments. Gov. Alejandro García Padilla has said Puerto Rico would default on at least part of the $1.9 billion.

"We are pleased to have reached an agreement allowing us to make the payment to bondholders and avoid a default," said PREPA Chief Restructuring Officer Lisa Donahue. "Today's outcome is another step towards PREPA's transformation. As a result of these agreements, we have preserved our cash position as we continue to implement an operational and financial restructuring."

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Puerto Rico
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