(Changes sourcing, recasts throughout)
By Nick Brown and Megan Davies
SAN JUAN/NEW YORK, Dec 18 (Reuters) - Puerto Rico’s debt-laden power utility, PREPA, has a tentative agreement with its bond insurers on a restructuring of its debt, according to two sources familiar with negotiations, but the deal is not official and still needs approval by PREPA’s board.
PREPA's monoline insurers would provide a surety bond of about $450 million to shore up new bonds being offered under a related restructuring deal with bondholders and lenders, the sources said. The deal was first reported by Bloomberg News. (bloom.bg/1Ym7Rsn)
A third person familiar with negotiations said it is too early to assume the deal will get done, as PREPA’s debt talks are contentious and fluid. A spokesman for PREPA and a spokeswoman for Puerto Rico’s government development bank had no immediate comment.
The first two sources stressed that the deal was not official, with one source adding it still requires the signing of term sheets and the eventual approval of PREPA’s board.
A previous agreement between the parties, reached in early December, was further along than this one when it fell apart before earning the PREPA board’s approval. Accounts differ as to what sank the deal, with some sources blaming PREPA for yanking it at the last minute, and others claiming insurers revised demands.
Overhauling PREPA, which faces more than $8 billion in debt, is seen as key to fixing Puerto Rico’s economy, which is hamstrung by a 45 percent poverty rate, a shrinking population and some $70 billion in debt.
Under a restructuring reached in September, PREPA’s bondholders and lenders agreed to accept 15 percent repayment reductions in exchange for new, healthier bonds.
But the deal hinges on the involvement of PREPA’s bond insurers, including Assured Guaranty Ltd and MBIA Inc’s National Public Finance Guarantee. They must provide a surety to ensure the new bonds, or else bondholders can walk away from their deal.
MBIA shares were up 14.8 pct to $6.21 on word of the deal, while Assured was up 4.4 percent at $25.99 per share.
PREPA had faced a Thursday deadline to secure a deal with the insurers, but announced it had extended that deadline through Friday.
The deadline is likely to be extended again as PREPA tries to nail down terms with the insurers. Furthermore, the deal requires passage of legislation which is being delayed because Puerto Rico’s congress is currently not in session. (Reporting by Nick Brown in San Juan and Megan Davies in New York; Writing by Nick Brown in San Juan and Amrutha Gayathri in Bengaluru; Editing by Sriraj Kalluvila, Shounak Dasgupta and Chris Reese)