By The Star Staff
The Financial Oversight and Management Board announced Wednesday that on or before July 17 it will file a new plan of adjustment for the Puerto Rico Electric Power Authority (PREPA) and a motion to reopen the confirmation hearing for the sole purpose of valuing the non-settling bondholders’ claim against the utility.
The proposed new plan of adjustment provides for the settling creditors to receive the consideration that was originally offered to the non-settling bondholders if they settled but became available to the settling creditors because the non-settling bondholders did not settle. This was referred to as the extra consideration. The plan amendments will provide for the use of the extra consideration, the approximate $168 million provided for the non-settling bondholders’ now disallowed unsecured claim, and loan proceeds to pay the new secured claim.
Based on the foregoing, confirmation will not require resolicitation of votes on the amended plan, the oversight board noted. The board said it understands that National will not agree to relinquish its portion of the extra consideration. Therefore, the amended proposed plan will provide National the same treatment as the non-settling bondholders and will deem national to reject the proposed amended plan of adjustment.
Accordingly, the oversight board proposed to the Title III court to proceed with confirmation in the following manner. After filing the amended plan of adjustment on July 17, the oversight board proposed setting aside Aug. 2 as the deadline for parties to file expert reports valuing the non-settling bondholders’ portion of the bondholders’ allowed secured claim. Aug. 16 will be the deadline for parties to file rebuttal expert reports and the closing of expert discovery will be on Aug. 23.
A hearing on the supplemental confirmation proceedings will be held by the court as soon as the court’s schedule permits after Sept. 13.
The change in the debt adjustment plan came after the U.S. Court of Appeals for the First Circuit issued its opinion on June 12, ruling that PREPA’s bondholders are secured by a perfected security interest in PREPA’s net revenues and that they hold non-recourse claims secured by the net revenues, and do not hold any unsecured claims. The First Circuit also reinstated the non-settling bondholders’ “accounting” claim but ruled “that in any legal or equitable action to enforce payment of the Revenue bonds, the Bondholders may only reach moneys available for debt service,” so the accounting claim “will not entitle them to reach any moneys or funds in which they do not already hold a security interest.”
As a result of the First Circuit’s ruling, the non-settling bondholders will have a secured claim and no unsecured claim. PREPA filed for bankruptcy in 2017 to restructure over $9 billion in debt.
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