Puerto Rico's Electric Power Authority, the island's main supplier of electricity, won an agreement with its creditors to extend negotiations for 15 days over what could be the largest-ever U.S. municipal-debt restructuring.
Prolonging the discussions allows the junk-rated utility to bargain with banks, bondholders and insurance companies beyond the original March 31 deadline, according to a statement Monday by the power authority. The agency, known as Prepa, signed an agreement in August with its creditors that delayed repayment of $696 million of bank loans through March.
"All parties believe advances have been made and there is merit to continue conversations with our creditors to find feasible solutions that will transform Prepa into a modern and sustainable utility," Lisa Donahue, the utility's chief restructuring officer, said in a statement.
Prepa, the biggest U.S. public-power authority, has $8.6 billion of debt. It must pay investors about $400 million in principal and interest on July 1. If bondholders agree to take a loss, it would be the largest debt restructuring in the $3.5 trillion municipal-bond market.
Creditors agreed not to take any enforcement actions while the pact to negotiate remains in effect, according to Prepa's statement.
The utility last year used funds designated for infrastructure improvements to purchase fuel. It had $1.75 billion of overdue accounts in September as residents, businesses and government entities fail to pay bills on time.
Prepa bonds maturing July 2037 traded Monday at an average price of 53.55 cents on the dollar, according to data compiled by Bloomberg. They traded this year for as little as 47.95 cents on Jan. 14.
