By Nick Brown
NEW YORK (Reuters) – Bondholders of Puerto Rico’s debt-laden power utility, PREPA, on Thursday said the agency had rejected a financing offer that might have allowed it to make a $450 million July 1 coupon payment.
Missing the payment could push PREPA, struggling with $9 billion of debt, into a version of bankruptcy created last year for Puerto Rico and its agencies, under the federal rescue law dubbed PROMESA.
A spokesman for Puerto Rico’s fiscal agency AAFAF, which leads debt restructuring efforts, could not be reached on Thursday.
PREPA is viewed as a microcosm for a broader economic crisis in Puerto Rico, which has $72 billion in debt, a 45 percent poverty rate and a $50 billion pension gap.
The U.S. territory’s central government, and some of its agencies, have already filed for PROMESA’s bankruptcy process, known as Title III.
The bondholder group said on Thursday it offered PREPA a $170 million loan to keep talks alive, but sides could not agree on terms.
“The bondholder group recognizes that PREPA is likely to file for Title III,” it said in a statement.
PREPA began restructuring talks with bondholders nearly three years ago, but two separate restructuring agreements fell apart.
The latest, which would cut bondholder repayments by 15 percent in exchange for new bonds backed by a charge on customer bills, was vetoed by Puerto Rico’s oversight board on Tuesday.
The board, created under PROMESA to manage the island’s money, said it would aim to negotiate a new agreement with stakeholders that would cap the invoice charges.
The decision riled creditors and some federal lawmakers, including U.S. Rep Rob Bishop, who chairs the House committee in charge of U.S. territory issues.
The board’s rejection “poses more questions as to (Puerto Rico’s) economic future and Congress will want answers to those questions,” Bishop said in a statement on Wednesday.
Puerto Rico Governor Ricardo Rossello on Thursday distanced himself from the PREPA saga, telling Reuters reporters in an exclusive interview that “I know as much information as you guys do” about the agency’s fate.
“Hopefully we’re going to find some stability on a path to resolving whether there is deal, no deal, Title III,” Rossello said. “Once that’s reconciled, we’re going to push forward aggressively” with plans to privatize much of PREPA’s operations.
Rossello said the latest deal was unworkable given the board’s desire to limit electricity rates. “There was no way you could reconcile the deal with that objective,” he said.
(Editing by Matthew Lewis)