CitiGroup Hired As Puerto Rico’s Broker-Dealer

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Puerto Rico has hired CitiGroup as a broker-dealer as the island seeks to restructure its debt, an industry source said on Wednesday.

The bank will host a meeting with creditors in New York on Monday, Melba Acosta, head of the island’s Government Development Bank, said. That will be the first meeting with creditors since Governor Alejandro Garcia Padilla said a week ago that he wants to restructure its $72 billion debt.

The gathering will focus on a report released last week by three former International Monetary Fund officials that said Puerto Rico is in a dire position because of high debt, unstable finances and a stagnant economy. Governor Alejandro Garcia Padilla on June 29 said he would seek to delay some debt payments for “a number of years.”

His administration has yet to say which securities would be affected or how such a restructuring would work. Some bonds are protected by the commonwealth’s constitution or backed by revenue such as sales-tax collections. Garcia Padilla said the government would draw up a proposed restructuring plan by the end of August.
The meeting comes after the Puerto Rico Electric Power Authority paid all principal and interest due to bondholders last week, buying the publicly owned utility time as it works to reach a deal with creditors. The authority, known as Prepa, said it had agreed with creditors, which include bondholders, banks and bond insurers, to extend restructuring talks to September.

A bondholders’ group said in a news release that they would continue to work with Prepa to reach a long-term plan. In addition to negotiations about Prepa’s $9 billion in debt, the talks involve plans to modernize the utility’s operations.

Investors and analysts had feared a default by Prepa could be the first of many from the commonwealth. Now, there’s hope among some investors that the utility will work out an agreement that could be a model for restructuring other Puerto Rico agencies.

To get the full story, read this article by reuters.com.