(Adds background on PREPA debt talks)
By Nick Brown
NEW YORK, March 29 (Reuters) - Creditors of Puerto Rico’s struggling power authority, PREPA, have presented the island’s government with a counter-offer to restructure the utility’s $8.9 billion of debt, two people familiar with discussions said on Wednesday.
The U.S. territory’s government received the offer during meetings with creditors this week, and was planning to review it ahead of a Friday deadline to finalize a restructuring deal at the utility, said the people, who requested anonymity because the talks are private.
While details of the offer remain confidential, the revelation that the parties involved are working on a deal is significant, given recent caustic rhetoric from creditors frustrated with Governor Ricardo Rossello’s demands for added concessions.
A spokeswoman for Rossello had no immediate comment.
A pending debt restructuring at PREPA has been in place since December 2015. Under that plan, creditors would accept 15 percent reductions in repayment in exchange for higher-rated bonds backed by a charge on customer bills.
When Rossello took office in January, many expected him to rubber-stamp the deal. He had campaigned last year on compromising with creditors and trying to minimize cuts to repayment.
Instead, he called for reopening talks to obtain more concessions from creditors, unveiling a proposal this month that would alter the agreement, including by removing the requirement for the new bonds to earn investment-grade ratings.
His approach has concerned investors who view PREPA as a bellwether for his approach to restructuring $70 billion in public debt that is pushing Puerto Rico’s economy toward collapse.
After a hearing last week in Washington of the U.S. House Subcommittee on Indian, Insular and Alaska Native Affairs, a consensual deal at PREPA seemed in jeopardy.
“Creditors were visibly frustrated,” KBW Inc analyst Chas Tyson said in a client note at the time.
Expiration of the pending deal, without a new deal in place, could open PREPA to lawsuits from creditors, and cast doubt on its ability to afford supply contracts and a $455 million debt payment due on July 1.
At the subcommittee hearing last week, Rossello said the added invoice charge could hurt consumers.
The federally appointed board tasked with managing Puerto Rico’s finances has said it supports tweaking the PREPA deal, which was reached before last year’s passage of the Puerto Rico rescue law known as PROMESA.
That law gives the island more negotiating leverage in talks with creditors, by allowing it to push struggling agencies like PREPA into bankruptcy if consensual deals cannot be reached. (Reporting by Nick Brown; Editing by Richard Chang)