By The Star Staff
The Financial Oversight and Management Board and a group of Puerto Rico Electric Power Authority (PREPA) stakeholders are slated to submit by this Friday a stipulation finalizing PREPA’s lien agreement, according to a court order issued Monday.
The order came after the oversight board, the Puerto Rico Fiscal Agency and Financial Advisory Authority, the U.S. Bank National Association as PREPA Bond Trustee, the Ad Hoc Group of PREPA Bondholders, Assured Guaranty Corp., Assured Guaranty Municipal Corp. and Syncora Guarantee Inc. sought additional time after announcing they were on the verge of writing a stipulation establishing an agreement regarding the perfection of liens on certain PREPA funds in the construction fund, the capital improvement fund and the reserve maintenance fund. If they are unable to file the stipulation on Friday (Aug. 11), they will file a status report.
The oversight board has also said that on Aug. 11 it expects to submit the third amended PREPA debt adjustment plan.
The stipulation is the last piece in a suit that determines the claims bondholders have on PREPA revenue. In March, U.S. District Judge Laura Taylor Swain, who is overseeing PREPA’s bankruptcy, had ruled that payment of the $8.4 billion PREPA bonded debt is not secured by a 1974 Trust Agreement.
She said at the time that PREPA bondholders have security interests only in moneys actually deposited to the Sinking Fund, Self-insurance Fund, Capital Improvement Fund, Reserve Maintenance Fund and Construction Fund. She also said the bondholders have perfected their liens in the Sinking Fund, Self-insurance Fund and Reserve Maintenance Fund, over which the Trustee had established control. She also said the bondholders have no security interest in the covenants and remedies provided for by the Trust Agreement.
However, based on PREPA’s payment and equitable relief covenants in the Trust Agreement, Swain said the bondholders have an unsecured claim to be liquidated by reference to the value of future net revenues as defined in the Trust Agreement. The oversight board has estimated the amount to be $2 billion.
The parties are trying to strike a deal on three funds in which Swain did not rule there was a perfected lien, which is a small portion of the $8.4 billion debt. The bondholders have said they plan to appeal.