SAN JUAN, Sept 19 (Reuters) - Puerto Rico’s power authority PREPA said it will continue debt restructuring talks with creditors even as some of them refuse to extend an agreement protecting PREPA from lawsuits.
PREPA, $9 billion in debt, has been in restructuring talks for more than a year with bondholders, bank lenders and bond insurers such as National Public Finance Guarantee Corp, Assured Guaranty and Syncora.
It reached a deal earlier this month with an ad hoc group representing 35 percent of its bond debt, but talks with other parties are ongoing.
On Saturday, the agency announced the insurers had refused to extend a forbearance agreement, which expired on Friday, barring creditors from calling defaults and filing lawsuits. The agreement, forged last year, had been extended several times before.
NPFG left the deal earlier this month, but PREPA revealed in a statement that other bond insurers have also now elected not to extend.
The ad hoc bondholders have agreed to extend the deal through Oct. 1, while lenders have extended it through Sept. 25, PREPA said.
The insurers’ departure from the deal leaves PREPA more vulnerable to litigation and means the insurers could try to push for a receiver to control PREPA’s finances.
For now, though, sides remain in cooperative talks, PREPA said. “We are making progress and will continue working towards a consensual resolution that benefits PREPA and all of its stakeholders,” Lisa Donahue, PREPA’s chief restructuring officer, said in the statement.
A source close to the bond insurers told Reuters on Friday the insurers were keeping litigation on the table and were prepared to “go to the mat,” resisting any deal that required taking a loss. However, ad hoc bondholders consistently said the same before agreeing to a deal on Sept. 1 to take a 15 percent haircut in exchange for new, more credit-worthy bonds.
Much of the debate at PREPA centers on its electricity rates. Creditors insist they should be raised to satisfy debt service, while PREPA would rather not burden ratepayers.
On Friday, NPFG petitioned the Puerto Rico Energy Commission to impose a rate hike, citing “PREPA’s breach of its legal and contractual obligations to raise rates” to pay debt.
Fixing PREPA is seen as a forerunner of whether Puerto Rico can overcome political and other challenges in mending broken agencies, and work its way out of $72 billion in total debt. (Reporting by Nick Brown; Editing by Clelia Oziel)