Solus Buys Citigroup’s $146 Million Puerto Rico Power Loan

Solus Alternative Asset Management took over a $146 million loan of Puerto Rico’s cash-strapped power utility from a division of Citigroup Inc. as a deal allowing debt principal to go unpaid extends into June, according to documents published by the island’s development bank.

Solus, a hedge fund that manages $5.7 billion and invests in distressed debt, signed the latest extension of a pact between the Puerto Rico Electric Power Authority and its lenders that’s keeping the energy producer out of default, a copy of the agreement dated April 30 and posted on the website of the Government Development Bank shows. Signers of the forbearance agreement attest that they hold a $146 million loan issued by the utility, known as Prepa.

A representative for the Puerto Rico office of Citibank N.A., a division of Citigroup that provides retail banking services, had signed the original agreement in August and two amendments to the pact this year, according to copies of the documents on the GDB website. Reuters earlier reported that Citi sold the loan to Solus, citing people it didn’t identify.

Opposite Views

While Marathon Asset Management’s Bruce Richards and Doubleline Capital’s Jeffrey Gundlach have touted Puerto Rico bonds this week as an investment that will make money, Pacific Investment Management Co.’s Sean McCarthy has been less sanguine and said Pimco “remains unenthusiastic” about the commonwealth’s debt. The U.S. territory’s liquidity has been drying up as traditional purchasers of municipal borrowings have refused to fund new debt and pulled existing positions.

Julia Kosygina, a spokeswoman for New York-based Solus at Abernathy MacGregor Group Inc., and Robert Julavits, a spokesman for Citigroup, declined to comment. Paul Scarpetta, a New York-based spokesman for the GDB at Sard Verbinnen & Co, didn’t immediately respond to telephone calls and e-mail messages seeking comment.

Solus is among a group of asset managers that have signed a separate pact that agrees to forbear on the utility’s more than $8 billion of bond debt, according to copies of the agreement. Ten other investors including hedge-fund firm Marathon Asset Management have signed the original agreement or extensions of it. The bondholders, along with three bond insurers, own at least $4.99 billion, or 60 percent, of Prepa’s bonds, according to the documents.

The current forbearance agreement expires June 4.

by Laura J Keller

Solus Buys Citigroup’s $146 Million Puerto Rico Power Loan