OFG Bancorp in San Juan, Puerto Rico, has sold its bank's participation in a line of credit to the Puerto Rico Electric Power Authority, or PREPA.
The $6.7 billion-asset company said in a press release Tuesday that gross proceeds from the sale were $124 million, an amount that was "slightly lower than the adjusted book balance, net of reserves." OFG did not name the buyer.
More important, the sale reduces OFG's exposure to Puerto Rico government-related credits by 45%, to $222 million. The move should also improve OFG's capital ratios since PREPA carried a risk weight of 150%, the company said.
"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," José Rafael Fernández, OFG's vice chairman, president and chief executive, said in the release.
"This loan has been a distraction overshadowing our other business successes far too long," he added. "Notwithstanding the sale, we expect the third quarter results to be similar to the prior period."