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Related BONDS MARKETSMarkets | Wed Sep 17 2014 232pm EDT

SEPT 17

UPDATE 1-Moodys downgrades Puerto Ricos PREPArevenue bonds

(Adds bond price context)

Ratings agency Moodys cut $88 billion of Puerto Rico Electric Power Authoritys (PREPA)revenue bonds further into junk on Wednesday saying bondholders could lose up to 35percent of their investment if PREPA defaults

Moodys cut its ratings on the bonds to Caa3 from Caa2 and said any restructuring at thetroubled utility could be influenced by political considerations adding that were risks aroundthe utilitys plans to convert its fuel supply

The ratings agency estimated the recovery rate from a PREPA restructuring at 65 percentto 80 percent It said that it viewed a restructuring as highly likely

The downgrade considers the uncertainty that persists regarding the details of theexpected restructuring plan by PREPA Moodys said (bitly1o3w4gk)

PREPA entered into a forbearance agreement with a majority of its bondholders inSeptember As part of that agreement it hired Lisa Donahue from Alix Partners to producea restructuring plan by next March

In an interview with Reuters earlier this month Donahue said it was too earlier to say ifbondholders would take a writedown in the event of a restructuring but said all options wereon the table

Moodys said PREPAs ratings were not expected to move upward over the nearshytoshymediumterm

PREPA bonds that mature in 2030 and carry a 595 percent coupon traded on Wednesdayat an average price of 53856 cents on the dollar That compared to an average price of54205 cents on Tuesday Last week the bonds average price was as high as 57816 centson the dollar (Reporting by Abinaya Vijayaraghavan in Bangalore Editing by SimonJennings and Tom Brown)

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