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Tuesday, March 17, 2015

Puerto Rico Utility May Default on July Payment, Moody’s Says

Puerto Rico’s Electric Power Authority, the island’s main energy supplier, may fail to pay bondholders about $400 million in principal and interest on July 1, according to Moody’s Investors Service.

The junk-rated utility, called Prepa, has about $678 million of restricted and non-restricted cash, the New York-based rating company estimates. That won’t be enough to cover both the July 1 payment to bondholders and continue a $300 million capital-investment plan, which includes converting facilities to burn natural gas rather than oil, according to a Moody’s report released Monday.

“Without access to the capital markets, we believe Prepa will try to preserve as much cash as possible in order to safely run its business and complete its capital spending program,” analyst Richard Donner wrote in the report. “For these reasons, we believe that Prepa will likely enter into a distressed exchange agreement by the end of June or will default on its July 1 payment.”

The utility signed an agreement in August with bondholders, creditors and insurance companies that put off payments on bank loans through March 31. Prepa is negotiating with the group to extend that agreement through at least June 30, according to two people with knowledge of the discussions.

Abimael Felix, a spokesman for Prepa, didn’t immediately respond to an e-mail seeking comment.

To contact the reporter on this story: Michelle Kaske in New York at mkaske@bloomberg.net

To contact the editors responsible for this story: Stephen Merelman at smerelman@bloomberg.net Mark Tannenbaum, William Selway



Puerto Rico Utility May Default on July Payment, Moody’s Says

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