The Puerto Rico Electric Authority bondholders said their loan offer to PREPA was a sincere offer to help and Puerto Rico’s government bitingly denounced it on Thursday and Friday.
On Wednesday the PREPA Bondholders Group offered a loan of up to $1.85 billion to PREPA in the aftermath of Maria. Maria has knocked down most of the island’s electrical distribution network. Later Wednesday Puerto Rico’s Fiscal Agency and Financial Advisory Authority released a sharply critical statement about the offer, rejecting it.
Late on Thursday the PREPA Bondholders Group responded to Puerto Rico’s rejection of their offer to loan, “We sincerely believed our loan would have helped PREPA finance its recovery and rebuilding efforts as quickly as possible in the wake of two terrible hurricanes,” said Stephen Spencer of Houlihan Lokey, the group’s financial advisor.
“We are all concerned with the well-being of the Americans [who] live in Puerto Rico and we continue to look for ways to engage with the commonwealth and work collaboratively in the ongoing recovery effort,” Spencer continued.
On Thursday afternoon FAFAA released a statement saying, “A fair and objective analysis of the PREPA bondholders’ proposal terms exposes it as nothing more than a carefully calculated publicity stunt with no other purpose except to benefit the trading value of the PREPA bonds.”
The PREPA bondholder group “grossly mis-characterize the terms” of its loan offer, FAFAA stated.
The loan’s two year maturity was unreasonable and showed the offer to be unserious, FAFAA said. A rollup feature is “inappropriate as it effectively causes the proposed rate of interest to skyrocket to 8%” and that would hamper the authority’s capacity to address other funding needs. The rollup also gave the loan-givers priority over other PREPA stakeholders.
“By requiring PREPA to accept the appointment of a receiver, the bondholders’ proposal aims at achieving an end-run around the recent court ruling in favor of PREPA in which the court denied such an appointment.”
“The government will flat out reject and block callous attempts by any group or constituency to leverage off the suffering of the people of Puerto Rico at their most vulnerable moment,” FAFAA said.