UPDATE 1-S&P cuts Puerto Rico's power authority rating four notches
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July 9 (Reuters) - Standard & Poor's Ratings Services slashed its rating on Puerto Rico Electric Power Authority's (PREPA) revenue bonds by four notches to 'B-' from 'BB', citing the agency's inability so far to negotiate the renewal of a line of credit from Citibank and the threat of potential debt restructuring.
PREPA said on Monday it won a reprieve until July 31 to work out payments on lines of credit with Citibank and ScotiaBank de Puerto Rico. It's on the hook for $671 million of payments through mid-August with the two lenders.
PREPA has been in talks with Citibank since that revolving credit matured in January. The revolving credit with ScotiaBank matures on Aug. 14, S&P said.
The ratings cut sparked a burst of trading of PREPA bonds on Wednesday, but prices were mixed and most bonds appeared to be trading within previous ranges.
The super-downgrade suggests "they might not be able to work out an agreement with the lenders," S&P analyst Judith Waite told Reuters.
"If that's the case, now that the new law has been passed, they now have an option that they might pursue," she said, referring to a law passed in late June that allows Puerto Rico's public corporations to restructure. "The delay in getting to a resolution with the liquidity providers seems in our mind to bring them closer to that point."
PREPA, which has $8.6 billion of power revenue bonds outstanding, has no other major lines of credit that S&P is watching, she said.
Analysts still think PREPA may be able to work out a resolution with the banks. Continuación...