Building upon its agreement with forbearing bondholders earlier this month, the Puerto Rico Electric Power Authority agreed Tuesday to debt restructuring terms with its lines of credit lenders.
Originally Citi and Puerto Rican banks extended these lines to the authority for it to draw on to purchase fuel. Since the start of this year Citi and Banco Popular have sold their lines to Solus Alternative Asset Management.
Scotiabank de Puerto Rico, Oriental Bank, First Bank Puerto Rico, and Solus had $700 million in overdue lines of credit.
Under the "agreement in principle" the fuel line creditors will be given two options, according to a written statement from PREPA. First, they will be able to convert their credit agreements into term loans, with a fixed interest rate of 5.75% per year, to be paid over six years in accordance with a schedule.
Second, they will be able to convert all or part of their principal due into bonds issued on the same terms found in the authority's agreement with the forbearing bondholders. In this agreement the bondholders accepted a 15% principal reduction and a five year principal payment moratorium.
On Sept. 2 the Ad Hoc Group of Forbearing Bondholders reached an agreement with PREPA on most of the terms of a debt restructuring for the bondholders, including a 15% reduction in principal and delays in payments. They have now agreed to a forbearance lasting to Oct. 1 to work out details. Bond insurers National Public Finance Guarantee, Assured Guaranty and Syncora Guarantee this month exited the forbearance.
Tuesday's "agreement when implemented will allow PREPA to decrease the interest rate PREPA is paying on its fuel line debts from 7.25% to 5.75%," PREPA said in the statement. "In addition, it will provide liquidity and financial flexibility by extending by at least six years the maturity dates for nearly $700 million that originally came due during the summer of 2014."
PREPA's forbearance with the fuel line holders was extended to Oct. 1 from Sept. 18.
"These lender agreements, when implemented, will create critical near-term liquidity relief for PREPA," said Harry Rodríguez, chairman of PREPA's board of directors.
"We continue to negotiate with our monoline bond insurers in an effort to reach agreement that will allow PREPA to continue to implement its transformation," said PREPA chief restructuring officer Lisa Donahue.
