Puerto Rico power authority weighs financing options as bank deadline nears

miércoles 30 de julio de 2014 18:56 GYT

SAN JUAN, Puerto Rico, July 30 (Reuters) - Puerto Rico's troubled electric power authority may dip into a construction fund to pay for vital oil shipments if talks with banks to extend $671 million in loans are unsuccessful, according to people familiar with the situation.

The banks are asking for a much higher interest rate to extend the loans than the authority, known as PREPA, has been paying so far, said one lobbyist, who has been discussing the matter with both government officials and investors in Puerto Rico bonds. The lobbyist could not be identified because of client confidentiality concerns.

In one potential deal, banks would extend loans until the end of the year at an interest rate equal to the London Interbank Offered Rate, or LIBOR, plus 9 percentage points, the lobbyist said. That would equate to about 9.24 percent based on the current level of LIBOR's benchmark three-month rate.

The status of the talks was unclear late Wednesday, but some analysts and Puerto Rico investors said they expect the credit lines to be extended in some form.

"I don't think those lenders are going to want to be the ones that force an insolvency filing under an untested new law whose constitutionality is being questioned," said David Tawil, president of Maglan Capital, a hedge fund that owns Puerto Rico's general obligation debt.

Still, PREPA is widely expected to restructure more than $9 billion in debt after the U.S. Commonwealth passed a law in June that gave the island's public authorities a legal framework to enter a process similar to a U.S. bankruptcy.

PREPA has a $250 million credit line with Citigroup and a $550 million line with a syndicate led by Scotiabank. About $671 of that is currently outstanding. Of that, $146 million is due to Citigroup on Thursday. The loan from the Scotiabank syndicate expired through the end of August.

PREPA did not release the terms of the forbearance agreement it reached with lenders on July 7, and it is unclear if banks could foreclose on the entire amount due.

Both Citigroup and Scotiabank declined to comment on the loans, citing client confidentiality. PREPA initially agreed to pay LIBOR plus 2.25 percent to 2.80 percent for its credit lines, according to a 2013 annual report. The loan facility with Citigroup has been extended since then but PREPA has not disclosed any new terms.   Continuación...