The San Juan Daily Star
Fiscal board submits names of parties intervening in its PREPA bankruptcy lawsuit
By The Star Staff
The Financial Oversight and Management Board has submitted to the Title III bankruptcy court the names of the parties that will be intervening in its lawsuit challenging the validity and extent of the purported liens securing about $8.5 billion in Puerto Rico Electric Power Authority (PREPA) bonds.
The latest development is part of PREPA’s bankruptcy process. The energy utility filed for bankruptcy in 2017 to restructure some $9 billion in debt.
The so-called PREPA lien challenge was stayed in 2019, but last month the court allowed the oversight board to resume it when talks to restructure PREPA’s $9 billion debt failed. Besides allowing the litigation to move forward, U.S. District Court Judge Laura Taylor Swain also allowed for mediation of disputes and ordered the oversight board to file a plan support agreement by Dec. 1.
The lien challenge is an adversary proceeding filed against the U.S. Bank National Association, which is the bond trustee, asking the Title III court to declare that the 1974 Trustee’s security interest in PREPA’s property is limited to funds deposited to the credit of the so-called “sinking fund” and “subordinate funds” under the 1974 Trust Agreement.
The oversight board said the intervenors in the case are the the Ad Hoc Group of PREPA Bondholders, Assured Guaranty Corp., Assured Guaranty Municipal Corp., National Public Finance Guarantee Corp., Syncora Guarantee Inc., the fuel line lenders, the Electrical Industry and Irrigation Workers Union (UTIER by its Spanish acronym), PREPA’s Employees Retirement System and the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials).
The Official Committee of Unsecured Creditors of All Title III Debtors (UCC) said it has been advocating for several years that the threshold questions as to the scope of the PREPA bondholders’ security interest and the non-recourse nature of the PREPA bonds should be litigated.
“Now that this litigation is finally going forward, the Committee seeks to intervene in this adversary proceeding as a coplaintiff. In order to obviate the need for motion practice, the Committee has been in discussions with the Oversight Board regarding a stipulation and agreed order that would govern the terms of the Committee’s intervention as a co-plaintiff,” the UCC said. “While these discussions are in an advanced stage and the parties have exchanged drafts of such a stipulation, the parties have not yet reached final agreement on the terms of that stipulation.”
However, based on the discussions with counsel to the oversight board, the UCC said it is hopeful that the stipulation to intervene will be finalized in the near future. In light of the foregoing, the UCC said it believes that it would be wasteful to prepare a separate motion to intervene in the adversary proceeding; however, because no final agreement has been reached, the UCC has filed a motion advising the court that it intends to intervene in the proceeding as a co-plaintiff.
Meanwhile, Swain also ratified the continuation of the mediators and also appointed Willkie Farr & Gallagher LLP as special adviser to the lead mediator for a fixed mediation fee of $50,000 a month.