Prices on Puerto Rico bonds fell to a record low after a meeting between investors and officials of the commonwealth’s power utility, which may restructure $8.6 billion of debt in coming months.
Commonwealth general obligations maturing in July 2035 traded today at an average of 84.17 cents on the dollar, the lowest since the securities were first sold March 11 at 93 cents, data compiled by Bloomberg show. Debt of the junk-rated U.S. territory is tax-free nationwide.
Puerto Rico Electric Power Authority officials told investors yesterday that they would seek more time to work on restructuring the agency, according to a person with knowledge of the meeting inManhattan, who requested anonymity because the talks were private. Reuters reported on the gathering earlier.
Utility representatives also submitted an incomplete business plan, according to the person. The agency was required to file a five-year strategy by Dec. 15, according to an August agreement with creditors that put off payment of bank loans. Prepa plans to request an extension of that agreement, which expires March 31, and will discuss a timeframe in January, the person said.
Abimael Lisboa Felix, a spokesman for Prepa in San Juan, didn’t respond to an e-mail and phone message requesting comment on the plans.
Stakeholders’ Benefit
Only investors and creditors who signed the August accord received yesterday’s report, as it’s a work in progress, Lisa Donahue, Prepa’s chief restructuring officer, said in a statement.
“These initiatives will be important as we continue to develop our turnaround and restructuring plan to ensure Prepa’s future, for the benefit of all stakeholders, including our employees, customers, creditors, and stakeholders,” Donahue said.
The limited distribution of the business plan hurt bond prices today, said Dan Toboja, senior vice president of municipal-bond trading at Ziegler, a broker-dealer in Chicago.
“The market prefers information,” Toboja said. “Any lack of disclosure or appearance of a lack of disclosure is going to spook investors a little bit.”
Prepa signed the August agreement after it tapped reserves and capital-fund cash to pay bondholders this year.
For Related News and Information: Puerto Rico Utility Needs to Move to Natural Gas, Official Says Puerto Rico Electric Utility’s Late Accounts Surge 219% From ’12 Puerto Rico Rally at Risk With Rising Debt Expenses: Muni Credit
To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.netMark Tannenbaum, Alan Goldstein
Puerto Rico Debt Sets Record Low After Utility Meets Investors
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