(Adds denial of deal from government sources, background of PREPA talks)
By Nick Brown
SAN JUAN, Dec 1 (Reuters) - Puerto Rico’s power authority, PREPA, reached a tentative debt restructuring deal with bond insurers, two sources familiar with the matter said on Tuesday, but two Puerto Rican government sources said later there was no agreement.
Two people involved in the restructuring talks between debt-laden PREPA and its creditors told Reuters on Tuesday afternoon that the parties had agreed to a tentative restructuring, which needed the approval of PREPA’s board.
But on Tuesday night, a source close to PREPA and another close to Puerto Rico’s Government Development Bank, both with knowledge of the discussions, said PREPA had not agreed to the terms.
A PREPA spokesman declined to comment on the situation.
A deal with the insurers, who include Assured Guaranty and MBIA Inc, would be one of the last major steps in overhauling PREPA’s more than $8 billion in debt.
The agency has been in restructuring talks with creditors for more than a year. It previously reached an accord with some of its major bondholders and lenders, but needs support of the insurers for the deal to be workable.
The bondholders and lenders agreed on 15 percent payment reductions in exchange for new bonds, but did so on the premise those bonds would be safer than the old ones, partly because PREPA would be required to maintain reserve funds.
The insurers are the ones negotiating to provide those reserves, in the form of a surety bond, a pot of liquidity they could fund or guarantee.
One of the sources who said there had been a tentative agreement said: “PREPA signed off on a deal over the weekend and informed creditors” it was taking the agreement to its board.
But the sources for PREPA and GDB said the agency had not deemed the terms acceptable or signed off on them.
A spokesman for MBIA declined to comment, while a spokeswoman for Assured did not immediately respond to a request for comment.
PREPA is a central piece of a broader fiscal crisis in Puerto Rico, which faces $72 billion in debt and is trying to persuade creditors of several Puerto Rican bond issuers to accept repayment cuts.
Reporting by Nick Brown; Editing by Bernard Orr and Peter Cooney