Puerto Rico's government attacked the offer of Puerto Rico Electric Power Authority bondholders to loan up to $1.85 billion on Thursday in Maria's aftermath.

On Wednesday morning the PREPA Bondholders Group had offered up to $1.85 billion in debtor in possession loans to the authority. According to the group, part of the package would be a new money loan of up to $1 billion. Another part would be their possible acceptance of an $850 million in DIP notes in exchange for $1 billion in outstanding bonds owed to them.

The Puerto Rico Electric Power Authority (PREPA) Palo Seco Power Plant in Toa Baja, Puerto Rico stands after Hurricane Maria in this aerial photograph taken on Monday, Sept. 25, 2017. Hurricane Maria hit the Caribbean island last week, knocking out electricity throughout the island.
PREPA's Palo Seco Power Plant in Toa Baja, Puerto Rico, stands after Hurricane Maria in this aerial photograph taken on Monday. The storm knocked out electricity throughout the island. Bloomberg News

“The bondholders’ proposal is an effort to leverage Puerto Rico’s crisis to improve the value of their debt rather than assist PREPA’s successful rebuilding efforts,” said Puerto Rico’s Fiscal Agency and Financial Advisory Authority in a written statement. “The financial terms and conditions are out of market and would in fact impair PREPA’s operational and financial restructuring.

“Such offers only distract from the government’s stated focus and create the unfortunate appearance that such offers are being made for the purpose of favorably impacting the trading price of existing debt,” FAFAA continued. “The bondholders’ proposal is not viable and would severely hamper and limit PREPA’s capacity to successfully manage its recovery.”

“The new funding would allow PREPA to provide the required matching funds under various grants from the Federal Emergency Management Agency,” the bondholders' group said in a press statement.

On Wednesday, Natalie Jaresko, the Puerto Rico Oversight Board’s executive director, was more positive about the PREPA bondholders’ offer. “We welcome and appreciate the expression of support from creditors,” said in a statement.

The Oversight Board was created under terms of the federal The Puerto Rico Oversight, Management, and Economic Stability Act, or PROMESA.

“The Board will carefully consider all proposals in coordination with the government, but it is still very early as we begin to navigate a way forward following the catastrophic impact Hurricane Maria had on the Island,” Jaresko said.

The PREPA bondholders group didn’t responded to a request for comment on the FAFAA statement.

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