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CDA-CUC proposed debt equity conversion is ‘still on the table’
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Posted on Feb 02 2009
The proposed debt equity conversion agreement between the Commonwealth Utilities Corp. and the Commonwealth Development Authority for the latter’s $45.5 million outstanding obligation is still on the negotiating table.
This, according to CDA acting executive director Oscar Camacho, who said that as of yesterday CUC has yet to send a formal response to the offer.
“We have yet to receive anything in particular from CUC pertaining to the proposed agreement,” Camacho said, adding that the agency had only a copy of the petition that CUC filed with the Public Utilities Commission, which included provisions on the debt equity conversion.
He said the agency’s legal counsel is working with CUC on the matter.
Camacho reiterated the agency’s position that CDA interest should be “superior” to any other obligations of CUC.
The acting executive director described the CUC petition as “confirmation” to the approach of CDA.
“The petition, for us, is a confirmation of the approach that we’re taking,” he said, adding that CDA wants to retain its superior status to any other debts or future debts to be incurred by the utilities corporation.
CDA, he said, need not act or comment on the petition but would wait until the time CUC agrees to the proposal.
CUC asked PUC to transfer $29 million in CUC preferred stock to the CDA so that it can address its longstanding debt.
The two agencies have been at odds over the loan, which affects CUC’s ability to borrow money and its plans for privatization.
The petition also revealed that CUC customers would shoulder a rate increase of about $5 million annually if the agency was to pay at market rates.
For those reasons, CUC is asking that the $45.5 million be converted to stock, with CDA waiving $16 million of it, for a total transaction of $29.4 million.
Under the same proposal, all accrued interest would be waived in return for settling the government’s utility bills. Dividend payments would be 2 percent annually and deferred for the first three years with the amount amortized over 15 years without interest.
PUC, if it agrees to the petition, will hold hearings on the matter in March.
