UPDATE 1-Puerto Rico utility closer to deal with creditors - sources

(Adds sources on potential financing arrangement)

By Edward Krudy and Nick Brown

NEW YORK, March 27 (Reuters) - Creditors of Puerto Rico's electric power authority are likely to agree by a Tuesday deadline to extend a forbearance agreement aimed at avoiding a potentially messy default, two people close to the matter said on Friday.

Negotiations between the power authority PREPA and creditors holding some $9 billion in debt will likely continue over the weekend, Lisa Donahue, PREPA's chief restructuring officer, said late on Thursday.

"PREPA expects to meet with the media and make a public statement on Monday," Donahue said in a statement.

An extension appears likely in the wake of a productive meeting between PREPA and its creditors on Thursday, said two people close to the talks who requested anonymity because the negotiations are private.

One group comprised of 60 percent of PREPA's bondholders has proposed to help finance PREPA's turnaround, though it is unclear how much momentum the proposal has.

The group, which includes OppenheimerFunds, Franklin Templeton, BlueMountain Capital Management and others, suggested it would be willing to backstop a financing arrangement that would be brought to the broader market, in exchange for concessions such as using savings generated by recent drops in oil prices to pay down debt, said the people close to the talks.

But one of the people voiced skepticism at the offer, calling it premature because Donahue has yet to fully analyze PREPA's business.

The forbearance agreement expires on Tuesday, after which creditors could accelerate their claims, potentially making the utility insolvent. (Reporting by Edward Krudy; Editing by David Gregorio and Richard Chang)

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