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Prepa Extends Forbearance Agreement with Local Fuel Lenders

By on January 24, 2016

SAN JUAN – In an interview Sunday with Caribbean Business, the Puerto Rico Electric Power Authority’s (Prepa) chief restructuring officer, Lisa Donahue, said the utility’s local fuel-line lending banks, Scotia group and the Government Development Bank (GDB), have provided it an extension of their forbearance agreement until Feb. 12, adding that Prepa continues working to bring in all its creditor groups.

Obtaining an extension from the Scotia group and GDB is important because of the seniority of that $550 million debt that was due in July 2014. “It was important that they were fine absent the extension of the Restructuring Support Agreement [RSA] and not intending to move against Prepa. I am glad to say that they are supportive given the complexity of the legislation,” Donahue said Sunday.

Prepa is also trying to bring in Solus Alternative Asset Management to the deal, which took on a $146 million line of credit that Citi reportedly had sold it. “Solus has taken a bit longer because their internal process is a bit different. I feel good about discussions with them, it is just matter of time,” Donahue told Caribbean Business.

Now that the lenders have given Prepa until Feb. 12 to get the Revitalization Act passed, the utility’s restructuring brigades have turned their attention to sticking points in the legislation, foremost among which is the rate restructuring.

Caribbean Business reported Friday that the Ad Hoc group of creditors added a new requirement to have the Puerto Rico Energy Commission pass a rate hike as a condition to making the $115 re-lending to bolster the utility’s liquidity. Debtwire Municipals filed a report Friday indicating that a 2-cent per kilowatt-hour surcharge was being sought.

The parties are aligned on the importance of continuing to seek enactment of the Revitalization Act over the next three weeks. The news means Puerto Rico may not have to worry about outages caused by a lack of fuel for the island’s powerplants. Prepa says it remains focused on supplying its residential and business customers with reliable power, while continuing its discussions with key stakeholders.  

“We are grateful to our fuel lenders for their support as we continue our efforts to transform Prepa. We are having ongoing discussions with the Ad Hoc Group and other stakeholders.  The passage of the Prepa Revitalization Act will provide the important tools to implement the changes necessary to transform Prepa into the modern utility that Puerto Rico deserves,”  Donahue said in a written statement released Sunday as well.

The RSA that collapsed following a missed Friday night deadline to pass legislation was an accord reached with 70 percent of Prepa’s bondholders that would have cut its debt by $600 million and relaxed terms on more than $700 million in debt payments in return for more secure new bonds.

Bondholders offered to extend the legislative deadline but wanted to change terms of a $115 million loan that would have provided liquidity to Prepa, but the authority found the new conditions unacceptable.

“We are disappointed that the [bondholder] group did not grant our requested extension. Prepa remains willing to continue discussions,” Donahue said in a statement issued late Friday, adding that bond insurers and bank lenders agreed to the extension without changing terms of the loan.

Representatives of the bondholders issued a statement describing the authority’s stance as “extremely disappointing and perplexing,” but adding, “We continue to remain open to reaching a deal with Prepa and it is our sincere hope that they reconsider their position and assume postures beneficial to the people of Puerto Rico.”

Bondholders and Prepa officials said they expected lawmakers to approve the legislation in the next few weeks.

Eva Lloréns Vélez contributed to this report.

 

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