The San Juan Daily Star
First in-person mediation meetings under court order set for next week
By The Star Staff
The mediation team in the Puerto Rico Electric Power Authority’s (PREPA) bankruptcy case announced Tuesday that in-person mediation seeking to negotiate a debt deal will take place on next Monday and Tuesday, May 22-23.
The mediation parties who will participate in the sessions are the Financial Oversight and Management Board, the Ad Hoc Group of PREPA bondholders, bond insurer Assured, bond insurer Syncora, and the Fiscal Agency and Financial Advisory Authority Committee.
The scheduling of subsequent sessions with the mediation parties and/or sessions with additional mediation parties will be determined by the mediation team promptly after the conclusion of next week’s sessions, the mediators said in a court document.
For months, mediators have said PREPA’s stakeholders were refusing to participate in mediation, prompting U.S. District Court Judge Laura Taylor Swain, who is overseeing the electrical utility’s Title III bankruptcy process, to convene an emergency status conference a week ago.
The announcement of the mediation meetings comes a week after the oversight board had said in court it could not enter into PREPA debt mediations if it was required to agree to increases in debt adjustment offers that are unsustainable.
Swain has said she may dismiss the case if the oversight board’s proposed plan isn’t confirmed. She also said she was more likely to dismiss the case than to allow the board to file another plan if the one under analysis wasn’t confirmed. Therefore, she called upon parties to negotiate a plan that had more stakeholder participation and advised the oversight board to weigh the potential of a dismissal against the risk that the board would agree to an unsustainable plan that would quickly fail and put Puerto Rico at risk.
The debt plan proposes to restructure PREPA’s debt principally through an issuance of $5.68 billion of new bonds to fund partial recoveries on creditors’ claims. PREPA owns about $8.26 billion in revenue bonds, plus some $218 million in prepetition accrued interest on such bonds. The utility also owns $700 million in fuel line loans and projects some $246 million to $4.9 billion in general unsecured claims. It also has over $3 billion in unfunded pension liabilities.
Under the proposed plan, PREPA will pay for the new bonds over a 35-year period through revenues from a legacy charge to PREPA’s customers, but the oversight board has said an affordable and sustainable legacy charge will generate only $5.68 billion in additional net revenues.
PREPA bondholders have said the debt plan is unacceptable and are seeking a higher amount in debt repayment.