By The Star Staff
The Financial Oversight and Management Board and the Unsecured Creditors Committee (UCC) are opposing a petition from a group of Puerto Rico Electric Power Authority (PREPA) bondholders to delay the bankruptcy confirmation schedule.
A subset of PREPA bondholders filed an urgent motion last week to extend the schedule of confirmation hearings on the debt adjustment plan to evaluate the impact of the recent settlement with the unsecured creditors. The confirmation hearing is slated for March.
Assured Guaranty Corp., Assured Guaranty Municipal Corp., GoldenTree Asset Management LP, Syncora Guarantee Inc., the PREPA Ad Hoc Group, and U.S. Bank National Association as the PREPA Bond Trustee filed an urgent motion for the extension of the schedule to approve the Fifth Modified Third Amended Title III Plan of Adjustment for PREPA, arguing that the recent settlement of the unsecured creditors’ debt will result in changes to the debt plan.
The oversight board said that despite their claims to the contrary, the subset of bondholders knew where the money was coming from to improve unsecured creditors payouts because the Puerto Rico Community Survey indicated that PREPA could sustain $250 million more in debt than previously estimated. That money goes first to National Public Finance Guarantee Corp., which will allow it to reach its capped amount, and the next $92.5 million goes to unsecured creditors.
“Creditors have more than sufficient time to investigate and assert any objections to the plan, whether related to the committee settlement or otherwise,” the board said. “The oversight board looks forward to demonstrating that any such objections are misguided and incorrect.”
The oversight board reached a settlement with the UCC on Dec. 18. The UCC would get a fixed payment of $335 million, the avoidance action proceeds, and other benefits.
In exchange, the UCC agreed to support the plan and drop an adversary proceeding arguing that its claims were superior to those of bondholders.
The UCC objected to the bondholders’ petition and opposed an assertion that the UCC can’t act in ways detrimental to bondholders.
“This argument would undermine the entire concept of a committee’s fiduciary obligations,” the UCC argued. “The committee represents all general unsecured creditors, not just one creditor or type of creditor, even a potentially large one.”
Earlier this year, U.S. District Judge Laura Taylor Swain ruled that the $8.5 billion in outstanding PREPA bond debt was unsecured, meaning that there is no property to seize, repossess or foreclose upon. She also ruled that the claim was only worth $2.4 billion. Under PREPA’s currently proposed adjustment plan, bondholders that haven’t already settled their debt with PREPA would receive 3.5% to 12.5% of the unsecured claim amount.