By The Star Staff
Blackrock informed the federal Title III bankruptcy court Wednesday that claims associated with the 2016 Relending Bonds should be estimated at the full face amount of $375 million plus interest.
The information came as part of the court’s request to estimate the size of the Puerto Rico Electric Power Authority (PREPA) debt. A hearing is slated for next week. Bondholders are seeking full payment of about $8 billion in bonds.
Blackrock said that first, the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, had not yet been enacted. In 2016, Puerto Rico did not have access to bankruptcy or the automatic stay, or have a receiver in place. The 2016 Relending Bonds constituted critical bridge financing that enabled PREPA to avoid a bond default and “preserved [PREPA’s] cash position” at a time when PREPA faced “very serious liquidity constraints.”
The 2016 Relending Bonds allowed PREPA to give its fuel providers and third-party electricity providers substantial assurance that they would continue to be paid.
“In short, the 2016 Relending Bonds were intended to be short-term financings that would be repaid in full, similar to debtor-in-possession financing in respect of PREPA’s restructuring, which was well underway under a Restructuring Support Agreement in 2016,” Blackrock said.
Blackrock also said the Financial Oversight and Management Board and other parties have taken the position from time to time that “Current Expenses” must be paid in full and, third, the higher interest rates and compounding interest on the 2016 Relending Bonds relative to the other bonds would have motivated a receiver to repay such 2016 Relending Bonds in full before the other bonds.
On June 29, 2016, PREPA reached an agreement with certain members of the Ad Hoc Group, Assured, National and Syncora Guarantee Inc. whereby the July 2016 bond purchasers would, among other things, purchase and re-lend approximately $264 million in power revenue bonds.
Meanwhile, PREPA contractor Cobra Acquisitions argued this week that the utility’s refusal to pay it with funds already approved by the federal government is impermissible.
Cobra is seeking to have a stay lifted so that it can seek $99 million in money that the Federal Emergency Management Agency has already approved, according to the response filed in PREPA’S Title III bankruptcy. PREPA argued that the stay, which is in effect until after the July confirmation hearing, should remain in effect because it doesn’t want to divert resources from confirmation, and, even with a court ruling, the money won’t be paid until after it completes its own review.
Cobra, which completed its work helping rebuild after Hurricane Maria over four years ago, said the review was an unacceptable excuse.