As parties go for mediation & litigation, governor says he’ll push for fair debt deal for PREPA
By The Star Staff
Gov. Pedro Pierluisi Urrutia said Tuesday that he and the Fiscal Agency and Financial Advisory Authority (AAFAF) are seeking a reasonable and sustainable restructuring of the debt of the Puerto Rico Electric Power Authority (PREPA).
“The Electric Power Authority has been in the process of bankruptcy and nonpayment of its debt since 2014,” the governor said in a written statement. “Currently, we are negotiating the restructuring of the debt before the court and are seeking to reach an agreement that ends the bankruptcy of PREPA with a reasonable and sustainable payment.”
“In the past, the creditors of the public corporation proposed onerous agreements to get debt payments. The Government of Puerto Rico rejected those proposals, so the process has now continued to the litigation stage,” he added.
“AAFAF continues to represent the Government before the Federal Court,” Pierluisi noted. “We trust that this will prove us right by addressing our claims to guarantee an affordable and fair restructuring with the interests of Puerto Rico’s people.”
A lawyer for the Electrical Industry and Irrigation Workers Union (UTIER), Rolando Emanuelli Jiménez, said the Financial Oversight and Management Board proposed a charge of up to $23 for each LUMA Energy subscriber to cover the payment to PREPA’s creditors. The creditors said the payment should be $26. The charge was just one of several items discussed during the failed mediation that fell through last month. The details of the proposals by the parties were published in the Sept. 21 STAR.
That report also said that to the extent that the oversight board wished to lower the rates that would otherwise be charged to customers, the bondholders suggested that the board and the AAFAF could eliminate PREPA subsidies, such as the contribution in lieu of taxes with municipalities, or require the commonwealth to reimburse PREPA for the subsidies.
“PREPA ratepayers have long been required by the Commonwealth to pay for subsidies to municipalities, business, agriculture and PREB [the Puerto Rico Energy Bureau], with little to no justification or benefit to PREPA,” the report said. “In FY 2022, these subsidies are forecasted to cost ratepayers $191 million, or 1.14 cents per kWh [kilowatt-hour] for residential ratepayers.”
Besides mediation, the oversight board informed the Title III bankruptcy court of the names of the parties that will be intervening in its lawsuit challenging the validity and extent of the purported liens securing about $8.5 billion in PREPA bonds.
The so-called PREPA lien challenge was stayed in 2019 but last month the court allowed the oversight board to resume it when talks to restructure PREPA’s $9 billion debt failed. Besides allowing the litigation to move forward, U.S. District Court Judge Laura Taylor Swain, who is presiding over the PREPA bankruptcy case, ordered the board to file a plan support agreement by Dec 1.
The lien challenge is an adversary proceeding filed against U.S. Bank National Association, which is the bond trustee, asking the Title III court to declare that the 1974 Trustee’s security interest in PREPA’s property is limited to funds deposited to the credit of the “Sinking Fund” and “Subordinate Funds” under the 1974 Trust Agreement.
The oversight board said the intervenors in the case are the the Ad Hoc Group of PREPA Bondholders, Assured Guaranty Corp., Assured Guaranty Municipal Corp., National Public Finance Guarantee Corp. and Syncora Guarantee Inc., the fuel line lenders, UTIER, PREPA’s Employees Retirement System and AAFAF.
The Official Committee of Unsecured Creditors of all Title III Debtors will be allowed to participate as a co-plaintiff with the oversight board in the case.