Creditors of Puerto Rico's power authority, PREPA, have offered it $2 billion in financing, including $1.2 billion to fund a new natural gas operation, in exchange for assurances that it would repay its debt, two people close to the matter told Reuters on Saturday.
Struggling under $9 billion in debt, PREPA has been in financial restructuring talks for months. Recent drops in oil prices have emboldened creditors to resist haircuts, and a forbearance agreement signed last August lapses on Tuesday.
The Ad Hoc group of creditors, which includes OppenheimerFunds, Franklin Templeton, BlueMountain Capital and others, made the new financing proposal during negotiations with PREPA to extend the forbearance, said the people, who declined to be identified because the discussions are private.
It is unclear how much momentum the proposal has, and it's feasibility may be challenged.
One of the people said PREPA is lukewarm to the offer, while a third person close to the discussions said it is premature because PREPA's chief restructuring officer, AlixPartners' Lisa Donahue, has not finished analyzing the power authority's financial state.
A market source familiar with Puerto Rico said that the bondholder group may receive take back paper - repayment in the form of new, discounted debt - and in addition provide financing for capital expenditure for PREPA. However, the source said such a restructuring did not seem sufficient to solve PREPA's problems.
Donahue on Thursday said PREPA would likely continue over the weekend to discuss a forbearance extension with creditors, and would plan to make a statement on Monday.
Donahue did not respond to an email on Saturday. A PREPA spokesman said the agency would not comment until Monday.
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