Puerto Rico’s cash-strapped electric utility and its creditors are close to a deal that would postpone a default by the utility when a $600 million payment comes due Wednesday, people familiar with the talks said.
If the deal is reached, it would effectively give the Puerto Rico Electric Power Authority (PREPA), which has about $9 billion in debt, an additional 90 days to reach agreement on a broader restructuring of its finances, thus “kicking [the] can” down the road, said one person familiar with the negotiations.
Puerto Rico Gov. Alejandro García Padilla on Monday portrayed his territory’s economic condition as even more dire than revealed and, in a televised address, appealed to Washington to make unprecedented changes in bankruptcy rules to help rescue the island’s finances. The deal with Puerto Rico’s electric utility would not affect the government’s struggle to reckon with the bulk of its roughly $73 billion in debt.
Though negotiations between creditors and PREPA were continuing late Tuesday, default would be averted by tapping $450 million from a debt service reserve account, $50 million in cash from the utility’s operating funds and, in an unusual twist, $100 million from a loan extended by bond insurance companies, a person familiar with the talks said.
If the deal outlines hold, the bond insurance companies would be making a substantial payment to avoid a default that would have forced them to make much larger payments.
PREPA, wholly owned by the Puerto Rican government, is in particularly dire straits because it has relied largely on burning oil to generate electricity, and oil prices have been at or near historic highs for most of the past seven years.
— Steven Mufson
Nike said Phil Knight, chairman and co-founder, will step down next year. Knight recommended that chief executive Mark Parker succeed him as chairman. Parker has been CEO since 2006.
Chairman since 2004, Knight said in a statement Tuesday that he would continue to play an active role in Nike even after his tenure ends.
Knight, 76, owned a 16.26 percent stake in Nike as of Dec. 31. He will transfer most of those shares, representing about 15 percent of Nike’s common stock, to Swoosh, a limited liability company.
Nike said it appointed Knight’s son Travis Knight to its board.
The company, which Knight co-founded in 1964 with Bill Bowerman, has raced ahead of rivals such as Under Armor and Adidas with its Jordan, LeBron and Kobe basketball shoe brands, popular with young Americans. Nike said last week that its annual profit grew 22 percent, to $3.27 billion, and its revenue rose 10 percent, to $30.6 billion.
● U.S. home prices grew at a solid clip in April, led by double-
digit jumps in Denver and San Francisco. The Standard & Poor’s/Case-Shiller 20-city index of home prices rose 4.9 percent in April from 12 months earlier, roughly the same annual pace as March, S&P Dow Jones Indices said. Prices in the Denver metro areas climbed 10.3 percent, while home values in San Francisco rose 10 percent. Values increased more than 7.5 percent in Dallas, Miami, Seattle and Tampa. But price growth was tepid in Boston, Cleveland and the District, where prices were up by 1.8 percent or less.
● A U.S. judge signed off on a $50 million settlement between the Consumer Financial Protection Bureau and Sprint over claims that the mobile carrier added unauthorized charges to customer phone bills. The settlement is part of a broader deal in which Sprint and Verizon Communications agreed to pay $68 million and $90 million, respectively, to end various government probes into the practice of “cramming,” in which mobile carriers charge customers for services such as horoscopes that they never ordered.
● Novartis should pay as much as $3.35 billion in damages and civil fines, the U.S. government said, because the Swiss drugmaker used kickbacks to boost sales of two drugs covered by Medicare and Medicaid. In papers filed late Monday in Manhattan federal court, the government said it deserves that sum under the federal False Claims Act over alleged improper reimbursements for Exjade, used by patients who receive blood transfusions, and Myfortic, for patients with kidney transplants.
● A record 85.1 million acres of soybeans are in the ground, the Agriculture Department said, but it’s not clear whether they’ll all sprout, because persistent rain in some Midwestern states has flooded fields and slowed plant development. Corn and soybean conditions in Illinois, Indiana, Iowa and Ohio have shown deterioration in recent weeks with the heavy rain. And in the soaked states, farmers who won’t get their soybean fields planted by Wednesday may be forced to use crop insurance to cover the lost production.
● Walt Disney Co. named its treasurer, Christine McCarthy, as its chief financial officer, replacing Jay Rasulo, a longtime executive who announced he was resigning earlier this month after it became apparent he would probably not be elevated to CEO. Disney also promoted Kevin Mayer to the newly created position of chief strategy officer.
● Goldman Sachs Group will pay $7 million to resolve Securities and Exchange Commission charges stemming from a programming error in 2013 that caused the stock-options market to be flooded with erroneous orders, roiling traders and prices. The SEC said Goldman mistakenly sent about 16,000 mispriced options orders to various exchanges. This caused about 1.5 million options contracts, representing 150 million shares, to be executed within minutes after markets opened, though Goldman tried to cancel the orders, the agency said.
— From news services
● Day-long: Motor-vehicle sales for June.
● 10 a.m.: Institute for Supply Management manufacturing index for June.
● Earnings: McCormick.