The San Juan Daily Star
Deadline arrives for PREPA creditors to say if they will intervene in board’s bondholder security
By The Star Staff
As of today, the Puerto Rico Electric Power Authority’s (PREPA) creditor groups are to inform the Title III court whether they will intervene in the Financial Oversight and Management Board’s challenge of the bondholders’ security guarantee.
After the oversight board walked out of mediation to negotiate PREPA’s $9 billion debt last month, the board asked the court for litigation of specific gating issues. In response to one of those requests, the Title III Court declared that the security interest of PREPA’s bondholders is limited to funds deposited in a “sinking fund” and that no security interest has been created. The bondholders are claiming about $8 billion in payment.
Another litigation also asked the court to determine if certain creditors, such as retirees and fuel line lenders, should be paid first. The court had stayed both litigations since 2019.
Lawyer Rolando Emmanuelli said in a radio interview that the Electrical Industry and Irrigation Workers Union and the PREPA Retirement System will be intervening in the case.
Last week, in a decision Emmanuelli described as “a monster with three heads,” U.S. District Court Judge Laura Taylor Swain, who is presiding over Puerto Rico’s Title III bankruptcy cases, including that of PREPA, ordered litigation of the gating issues and mediation. She also asked the oversight board to submit a plan support agreement by Dec. 1.
“This is a monster with three heads: litigation, mediation, and debt adjustment plan, and not just any debt adjustment plan; it has to be one with different options depending on the result of the litigation,” Emmanuelli said. “It is not a real plan with a real scenario. If the litigation has not been completed and the mediation has not ended, the debt adjustment plan is very uncertain.”
The litigation, Emmanuelli noted, will be resolved using documents or without a hearing. He said that if the judge decides that the bondholders have an unsecured credit, the oversight board does not have to pay them anything.
In that regard, Emmanuelli questioned a proposal by the board to the bondholders to cut the debt by 30%.
“They also had proposed a connection charge for all clients of 23 cents per kilowatt-hour subject to the cost of living for 50 years,” he said. “Meanwhile, the bondholders were asking for the repeal of subsidies.”
Regarding the mediation, the oversight board asked the court to ratify Willkie Farr & Gallagher LLP as special advisers to the lead mediator.
PREPA filed for bankruptcy in 2017 to restructure some $9 billion in debt.