UPDATE 2-Bondholder group says PREPA's criticisms fundamentally flawed
(Adds Standard & Poor's downgrade)
By Edward Krudy
NEW YORK, April 24 (Reuters) - A group of bondholders in Puerto Rico's power authority, PREPA, slammed on Friday the public utility's criticisms of their $2 billion restructuring plan, saying the objections were flawed and based on misunderstandings.
The statement came in response to PREPA's rejection late on Thursday of the bondholders' plan to overhaul the utility. PREPA said the plan underestimated costs by $3.1 billion over its nine-year span and was based on "numerous incorrect or unrealistic assumptions."
The eight-month-old negotiations between PREPA and its bondholders are showing little outward sign of progress and relations between the sides have become increasingly frosty.
Standard & Poor's cut its rating on the utility's debt further into junk on Friday. The agency criticized PREPA's use of reserve funds to make bond payments and said some form of debt impairment was inevitable in the next six months.
PREPA is struggling with more than $9 billion in debt. The bondholder group, which calls itself the Ad Hoc Group, holds about 60 percent of more than $8 billion in outstanding bonds.
After a liquidity crisis last summer, those bondholders agreed not to call a default if PREPA took certain steps to restructure.
Since then PREPA has repeatedly drawn on its reserve funds to meet debt payments, most recently using $8.8 million to make a quarterly bond payment on April 1. Continuación...