OFG Bancorp announced Tuesday that its subsidiary Oriental Bank’s outstanding participation in a line of credit to the Puerto Rico Electric Power Authority (PREPA) has been sold, thereby significantly reducing its direct exposure to Puerto Rico government related credits.
Gross proceeds from the sale were $124 million, slightly lower than the adjusted book balance, net of reserves.
“While we expect an eventual, positive resolution to PREPA’s restructuring efforts, we are capitalizing on this opportunity to exit our $200 million fuel line position in a smooth manner,” said OFG President José Rafael-Fernández.
“This loan has been a distraction overshadowing our other business successes far too long. Notwithstanding the sale, we expect the third quarter results to be similar to the prior period,” he said.
“Our strong capital ratios should improve even more since PREPA carried a risk weight of 150 percent. Additionally, we are sharply reducing OFG’s direct exposure to PR government credits by 45 percent to $222 million using June 30, 2016 ledger balances. Almost all of our remaining PR government exposure is to the five largest, financially sound municipalities,” he said, adding that the PREPA is “prudent given the continuous uncertainty in our operating environment.”