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CUC petitions for CDA stock transaction
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Posted on Jan 26 2009
The Commonwealth Utilities Corp. has petitioned the Public Utilities Commission to convert $29 million in CUC preferred stock to the Commonwealth Development Authority, in order to reach a resolution to a longstanding debt.
CUC and CDA have been at odds over a $45.5 million loan for several years. Because of CUC’s debt the agency is unable to borrow money. The debt also impedes any chance of privatization, according to CUC.
“No business would buy CUC for a reasonable price as long as the liability appears on CUC’s books,” the lawyer for CUC wrote in the petition.
Also, according to the petition, CUC rate holders would have to shoulder a rate increase, around $5 million a year, if the utility agency was to repay 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 CUC’s 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.
CUC and CDA have been negotiating settlement agreements for some time.
“CDA, I think has a position with respect to conversion from loan to equity, equity being a preferred stock ownership position that may be above and beyond what would normally be afforded preferred stock holders. It’s an issue of negotiation, and it’s not unexpected considering CDA’s position,” said CUC executive director Antonio Muña.
They’re trying to protect their interest, he added.
But, Muña said, once an agreement on converting to equity is agreed upon it will be a positive step.
