Departure of fiscal board members could benefit interests of PREPA bondholders

Luis Avilés, former chairman of the Puerto Rico Electric Power Authority governing board (Facebook via Luis Anibal Aviles)

By The Star Staff

Former Puerto Rico Electric Power Authority (PREPA) Governing Board Chairman Luis Avilés charged this week that bondholders of the public utility are lobbying to replace the five recently fired members of the seven-member Financial Oversight and Management Board with individuals who are sympathetic to their interests.

In a radio interview, Avilés expressed concern that the departure of the five members marks the beginning of new challenges for the oversight board. He revealed, based on a reliable source, that bondholders are seeking to appoint new members who will support their efforts to secure full repayment of PREPA’s $8.5 billion debt. Before the firings, which occurred on Friday, the oversight board stated that PREPA could not pay its debt and advocated for reducing it to $2 billion.

Avilés cautioned that pursuing debt collection without implementing necessary cost reductions will only exacerbate the island’s economic crisis. If energy costs continue to rise, many residents may struggle to pay their electricity bills, potentially leading to business closures and a deeper economic downturn.

Additionally, Avilés suggested that one possible solution could involve completely transferring PREPA to the federal government, a move that would effectively eliminate the roles of LUMA and Genera, possibly resulting in uncontrolled fee increases, further bankruptcy for the system, and the need to start over.

He also questioned the role of Gov. Jenniffer González Colón, noting that while she holds a position on the oversight board, her influence is limited. Avilés stated that the governor’s political alignment with President Trump does not serve the interests of the people of Puerto Rico. González Colón is a national Republican.

Trump dismissed Arthur J. González, the chairman of the oversight board, along with board members Cameron McKenzie, Betty A. Rosa, Juan A. Sabater and Luis A. Ubiñas, leaving only two members in place, plus one appointed by the governor of Puerto Rico, as confirmed by CBS News and a White House official. The dismissals were first reported by Breitbart.

Four of the dismissed members were appointed by Democratic presidents, while Betty A. Rosa was nominated by Trump during his first term and later renominated by President Biden.

U.S. Nydia Velázquez (D-N.Y.) stated that while she has “serious and longstanding” concerns about the fiscal board, the president’s actions are not the solution.

“This sudden purge by Donald Trump is not about justice or reform,” she said in a statement. “It does not dismantle the board or change the law that created it, known as PROMESA. It simply creates an opening to stack the board with even more extreme, pro-bondholder appointees who will continue to prioritize the interests of hedge funds over those of the Puerto Rican people.”

The board has overseen the most expensive municipal bankruptcy in U.S. history, incurring roughly $2 billion in fees and expenses over almost a decade. Nonetheless, it has saved $72 billion in lower debt costs and reduced spending under the leadership of former board chair David Skeel, a bankruptcy and corporate law professor at the University of Pennsylvania, and his successor, former bankruptcy judge González.