Utility, creditors close to a deal

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 co-founder to vacate chairman post

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.

— Reuters

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