
By The Star Staff
Commonwealth claims reconciliation monitors are defending their attempts to pursue the subordination of the Puerto Rico Electric Power Authority (PREPA) bond claim, according to a recent court document.
The monitors, which were appointed by the Unsecured Creditors Committee (UCC), also rejected a PREPA bondholders’ argument that lifting the litigation stay in the PREPA bankruptcy case to decide the issue didn’t promote judicial efficiency.
“The objection does not attempt to respond to the reality that the commonwealth’s general unsecured creditors are entitled to finality on the commonwealth plan so as to permit them to begin receiving distributions,” the claims reconciliation monitors said.
The U.S. Bank National Association, which is the PREPA trustee, opposed a monitors’ request seeking a partial lift to the confirmation stay of PREPA’s case to pursue litigation to reclassify the PREPA’s bond trustee debt claim against the commonwealth.
While the court confirmed the commonwealth debt adjustment plan for the bankruptcy case in 2022, the commonwealth general unsecured claims have not been paid because of the unresolved issue. The U.S. Bank National Association is asserting an $8 billion unsecured claim against the commonwealth. The $8 billion is also the amount owed in PREPA bonds.
The claims’ monitors, Carol Flaton and Ramón Ortiz, want to reclassify the debt, arguing that they believe the U.S. Bank National claim is not a commonwealth general unsecured claim and that, instead, it should be classified as an unsubordinated claim under the Commonwealth Plan, they said.
U.S. District Judge Laura Taylor Swain asked parties to brief her on allowing the litigation to commence during the stay in September, after the monitors said in an informative motion that once bondholders’ claim had been classified, the commonwealth could start making payments to unsecured creditors.
Commonwealth unsecured creditors, who have been waiting since the March 2022 effective date of the commonwealth plan, still haven’t been paid anything because the court has not yet determined if PREPA bondholders have an $8 billion unsecured claim against the commonwealth.
The claims reconciliation monitors have said they have standing to bring a case.
“This classification issue falls squarely within the authority granted to the claims reconciliation monitors under the commonwealth plan, and it should come as no surprise that the objection cannot point to a single case where a party who was granted certain rights under a confirmed plan of reorganization was later found (by the very court that confirmed the plan) to lack standing to avail itself of those rights,” the reply said.
The monitors also disputed a bondholders claim to the effect that the classification litigation had no bearing on PREPA’s Title III case. The total amount of CW general unsecured claims is approximately $3.5 billion. While the trustee proof of claim is unliquidated in amount, the Financial Oversight and Management Board has reserved $8.4 billion on account of it.
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