July 7, 2014 2:00 p.m. ET
The Puerto Rico Electric Power Authority reached agreements with two banks to defer payment on lines of credit that threatened to burden the cash-strapped utility with $671 million in obligations between now and mid-August.
The power authority reached deals with lenders and "may delay certain payments currently due until July 31, 2014," according to a news release from the authority released Monday. The two lenders are Citibank and Scotiabank de Puerto Rico, a person familiar with the matter said.
The authority said in the news release that it would "use this period to evaluate various alternatives to improve its financial situation."
Puerto Rico has about $73 billion in total obligations, including those owed by its so-called public corporations, and has been struggling with unemployment more than twice the national average and a sluggish economy. Its debt is widely held by mutual funds and individuals, and some analysts worry that the power authority's troubles could escalate into a wider Puerto Rican default and losses for investors nationwide.
Puerto Rico lawmakers last month approved legislation allowing some agencies, such as the island's power, water and transportation authorities, to restructure their debt. Those agencies have a combined $19.4 billion outstanding, according to estimates from Barclays BARC.LN -1.14% Barclays PLC U.K.: London GBp216.05 -2.50 -1.14% July 7, 2014 5:09 pm Volume (Delayed 15m) : 27.68MP/E Ratio 43.21 Market Cap GBp35.88 Billion Dividend Yield 1.85% Rev. per Employee GBp262,765222.50220.00217.50215.009a10a11a12p1p2p3p4p 07/07/14 Puerto Rico Electric Power Aut...07/07/14 Europe Stocks Fall as German I... 07/06/14 IEX Pricing Aims to Drain 'Dar... More quote details and news » BARC.LN in 
Your Value Your Change Short position PLC. The law doesn't apply to Puerto Rico's general-obligation or sales-tax debt.
Your Value Your Change Short position PLC. The law doesn't apply to Puerto Rico's general-obligation or sales-tax debt.
Funds managed by Franklin Templeton Investments and OppenheimerFunds Inc. have challenged the legislation in court, saying the act is a bankruptcy law that "treads on the Congress's exclusive province in enacting such legislation."
Reforming the island's public corporations has become central as the administration of Gov. Alejandro Garcia Padilla tries to jump-start the economy, eliminate budget deficits and reassure investors that the U.S. commonwealth's fiscal position is improving after an eight-year recession.
William Dudley, president of the Federal Reserve Bank of New York, said in a speech last month that large, indebted, corporate-like public entities account for almost 40% of the island's debt.
"For any financial reform agenda to be successful, it must confront this issue head on," he said.
Write to Mike Cherney at mike.cherney@wsj.com
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Puerto Rico Electric Power Authority Reaches Deal With Lenders
Wall Street Journal William Dudley, president of the Federal Reserve Bank of New York, said in a speech last month that large, indebted, corporate-like public entities account for almost 40% of the island's debt. "For any financial reform agenda to be successful, it must ... |
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