Court denies unsecured creditors’ request to compel discovery of docs in bid to end PREPA debt deal


By The Star Staff


In what appears to be good news for the Puerto Rico Electric Power Authority’s (PREPA) restructuring, U.S. Magistrate Judge Judith Dein has denied a request from the Official Committee of Unsecured Creditors (UCC) to compel discovery of documents in relation to a prior petition to end PREPA’s debt deal to restructure some $9 billion in debt.


In a decision last week, Dein said the discovery sought by the UCC was irrelevant to the question of whether the government has abandoned the restructuring support agreement (RSA) altogether. The island government has said the debt deal, whose evaluation has been suspended more than 11 times, is alive and kicking. The government is slated to submit a status report later this month.


“To the extent that the UCC’s argument in connection with its motion to dismiss is premised on an implied abandonment or termination of the RSA, there is sufficient information in the record already to enable the UCC to present the argument to the court,” Dein said.


The UCC had recently requested an order dismissing PREPA’s 9019 motion because “the government parties no longer support the underlying RSA, and therefore the court lacks subject matter jurisdiction over the dispute.”


The UCC alleged that “recent public statements from leaders of the [Financial Management and] Oversight Board and PREPA in which they explain that the RSA must be renegotiated and that such renegotiations are unlikely to begin until sometime in 2021” was evidence that the government parties have already decided to abandon the RSA in its current form and to not prosecute the 9019 motion.


In particular, the UCC pointed to statements made by PREPA’s former executive director, José Ortiz. The UCC also relied on a statement from PREPA governing board member Robert Poe that the “RSA that was considered last year [is] a whole different situation” given that interest rates have now plummeted such that “money is almost free at this point.”


The committee then sought to pursue discovery to back up its claims. The document request sought documents and communications, dated from June 1 through the present, relating to the status of the RSA and the 9019 motion.


The government parties replied that no decision has been made to abandon the RSA, and that they are continuing to evaluate the feasibility of the debt deal. They charge that the committee was not entitled to any discovery because the documents were privileged.

Dein agreed with the government, noting that much of what the UCC was arguing was speculative.


“Individuals’ opinions are of minimal probative value as to whether the government parties have made a decision to abandon the RSA or not prosecute the 9019 Motion,” Dein said. “The UCC does not allege that the RSA expired on its own terms. The UCC also does not dispute the fact that contractual termination of the RSA can only be achieved by resolution, and no such resolution has been made.”


As the government asserted, Dein said the RSA’s status is not a matter of opinion or a subject of inquiry, it is an objective fact and, by its terms, the RSA remains in effect unless and until a termination right is executed.