Fiscal board urges judge to keep PREPA bondholders’ receiver bid on hold.

By THE STAR STAFF

The Financial Oversight and Management Board for Puerto Rico has asked a federal judge to deny a renewed request by PREPA bondholders to lift a court-ordered litigation pause so they can pursue the appointment of a receiver for the Puerto Rico Electric Power Authority (PREPA) or seek dismissal of the utility’s Title III bankruptcy case.

In its objection filed Tuesday in U.S. District Court for the District of Puerto Rico before Judge Laura Taylor Swain, the board said the bondholders’ push is “backwards” because they are asking for protection of collateral while resisting efforts to determine the value of the only collateral they are entitled to after a 2024 First Circuit ruling: PREPA’s present and future “net revenues,” if any.

The bondholder groups -- including GoldenTree Asset Management, Assured Guaranty, Syncora Guarantee and National Public Finance Guarantee -- have argued that PREPA is generating and spending net revenues that secure their bonds and that they should be allowed to return to court to revive motions tied to a receiver and case dismissal.

The oversight board countered that there is “no adequate protection greater than payment in full” and said PREPA’s currently proposed plan of adjustment contemplates paying bondholders the full value of their allowed secured claim once the court determines it. The board also argued that a receiver would still be bound by fiscal plans and budgets certified under the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, and that displacing current private operators LUMA Energy and Genera PR could disrupt the grid’s ongoing transition while exposing the estate to additional costs.

The filing also points to prior rulings in the case in which the court allowed the bondholders to proceed with an accounting dispute and to litigate an administrative expense claim. The oversight board said those steps already provide the bondholders a pathway to develop a record on whether “net revenues” existed historically and how they should be calculated -- issues that would feed into the eventual valuation of any secured claim.

To rebut allegations that PREPA is diverting surplus revenues, the board cited findings in a recent Puerto Rico Energy Bureau rate proceeding describing widespread deterioration across generation, transmission and distribution, plus continued weaknesses in financial recordkeeping. Those conditions, the board argued, undermine the notion that PREPA has been sitting on meaningful excess revenues while bondholders have been blocked from remedies.

PREPA has been in Title III since 2017. The court imposed a broad pause on “substantial PREPA-related litigation” in July 2024 and later extended it, then partially lifted the pause in March 2025 to allow briefing on the bondholders’ administrative expense request and the filing of an amended plan. The court denied the bondholders’ administrative expense bid in March 2026, and the bondholders renewed their request to lift the litigation stay on March 30. Their motion is noticed for a May 20 omnibus hearing, according to the docket.

Judge Swain has not yet ruled on the renewed request to broaden the litigation stay lift.