Bondholders group insists PREPA POA, disclosure statement are unconfirmable.
By The Star Staff
The Ad Hoc Group of Puerto Rico Electric Power Authority (PREPA) bondholders is insisting that an amended plan of adjustment for PREPA and disclosure statement filed last Thursday are unconfirmable, while the Financial Oversight and Management Board said the court should approve them because at issue is whether they contain adequate information, not whether they should be confirmed.
On Thursday, the oversight board filed a “First Amended Title III Plan of Adjustment” for PREPA, accompanied by the “Amended Disclosure Statement.” The new plan and amended disclosure statement reflect the terms of the oversight board’s settlement with National Public Finance Guarantee Corp., add two new classes of claims, and incorporate a number of new or revised exhibits regarding PREPA’s proposed “legacy charge” and other components of its plan.
The plan proposes to cut PREPA’s more than $10 billion of debt and other claims by almost half, to some $5.68 billion. A legacy charge for certain customers not currently benefiting from subsidized electricity rates would be, on average, about $19 a month. The PREPA legacy charge, which will be used to pay bondholders, would exclude qualifying low-income residential customers from a connection fee and kilowatt-hour (kWh) charge for up to 500 kWh per month. For non-subsidized residential customers, the proposed PREPA legacy charge would be: a flat $13 per month connection fee, 75 cents per kWh for up to 500 kWh per month of electricity provided by PREPA, and 3 cents per kWh for electricity above 500 kWh per month.
For commercial, industrial and government customers, the proposed legacy charge would entail: a connection fee of between $16.25 and $20 per month for small business customers and smaller industrial companies, and $1,800 per month for large businesses proportional to their current rate. They would pay between 3 cents and 97 cents per kWh per month for electricity provided by PREPA.
The Ad Hoc group said the oversight board proposes to settle National’s bond claims for more than 83 cents on the dollar, well above the 50-cent settlement offer the board is currently offering other bondholders.
“What is more, the Oversight Board appears to have accommodated its settlement with National by adjusting the total distributable value that it asserts to be all PREPA can afford to pay creditors, but (once again) without any explanation of how and why PREPA can now afford a different sum than what the Oversight Board has previously asserted,” the Ad Hoc Group said.
The oversight board said the disclosure statement reflects the inclusion of a settlement reached between the board and National and many changes to accommodate the objections to the disclosure statement and disclosure statement motion.
“Instead of focusing on the issue before the Court -- whether the Disclosure Statement contains adequate information -- many groups, including Syncora and the Ad Hoc Group -- dedicate the vast majority of their Objections to opposing confirmation,” the oversight board said. “As the jurisprudence makes clear, confirmation objections are premature at the disclosure statement hearing except for objections showing a plan provision renders the plan patently unconfirmable under any set of facts.”