(Adds details on board’s decision)
By Nick Brown
June 28 (Reuters) - Puerto Rico’s financial oversight board said on Wednesday it was still in debt restructuring talks with creditors of the island’s power utility, PREPA, a day after rejecting a proposed deal to restructure $9 billion of the utility’s bonds.
In public documents posted on its website, the board said its main concern about the deal was that it could squeeze consumers as demand at PREPA declines.
The board’s rejection had riled creditors, and it faced a lawsuit from insurers of PREPA bonds who argued the board, created last year under a federal law enacted by the U.S. Congress, had no legal authority to veto the deal.
On Wednesday, the board said it could still be persuaded to embrace the debt restructuring agreement with certain changes, including a cap on charges to customers. A special charge on consumer bills would back new debt issued under the deal.
The board is charged with managing the U.S. territory’s finances and leading it back to economic growth after a decade of contraction.
Puerto Rico is facing a historic economic crisis, marked by $70 billion of debt, a 45 percent poverty rate and a shrinking population as residents flock to the U.S. mainland.
Last month, it filed the largest bankruptcy in U.S. municipal history.
PREPA, hamstrung by mismanagement and outdated infrastructure, is seen as a microcosm of the island’s problems. It began debt restructuring talks with holders of its $9 billion in bonds nearly three years ago, but an initial workout agreement stalled over regulatory concerns and was then rejected by Puerto Rico Governor Ricardo Rossello.
Under a new deal, reached in April, PREPA creditors agreed to accept 15 percent repayment cuts in exchange for new debt backed by a charge on customer bills.
Dominic Frederico, chief executive of Assured Guaranty Ltd , which insures nearly $800 million in PREPA bonds, pilloried the board’s rejection of the latest deal, saying in a statement on Wednesday it was “yet another example of a rogue oversight board.”
But the board said it would continue talks with PREPA’s stakeholders, and could accept the deal with caps on the securitization charge. It also wants to impose a more flexible amortization structure, designed to ensure the bonds still pay by their final maturities, even under the caps and PREPA’s declining demand forecast.
The board said it was not looking to further cut repayments to creditors. (Reporting by Nick Brown; Editing by Sandra Maler and Tom Brown)