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  • Writer's pictureThe San Juan Daily Star

FOMB to seek reopening of PREPA bankruptcy record to pay bondholders



Oversight Board’s Chairman David Skeel.

By The Star Staff


The Financial Oversight and Management Board will ask the Title III court to reopen the record of the Puerto Rico Electric Power Authority’s (PREPA) confirmation hearing to ascertain how much the utility will pay to its bondholders following last week’s U.S. First Circuit’s decision that PREPA bondholders’ secured credits against the utility extend to PREPA’s net revenues.


The ruling means consumers should expect a possible hike in utility rates.


On June 12, the U.S. Court of Appeals for the First Circuit’s handed PREPA bondholders an important victory in their ongoing battle to come out of PREPA’s bankruptcy with as much money as possible. The First Circuit’s decision ruled that PREPA bondholders have a secured interest against the utility that extends to PREPA’s net revenues and includes the bonds’ principal and interest, estimated at $8.5 Billion.


The FOMB in a motion Monday discussed how it plans to proceed to conform to the opinion of the First Circuit and to enable Title III Court Judge Laura Taylor Swain to confirm the PREPA Plan.


Because the First Circuit ruled the bonds are secured by an unavoidable security interest in net revenues, the PREPA Plan must pay in full the value of that security interest or its indubitable equivalent, the FOMB said.


“Therefore, the Oversight Board plans to request a reopening of the confirmation hearing record for the limited purpose of valuing the non-settling bondholders’ share of the net revenues and showing the court how such value as determined by the court will be paid,” the FOMB said.


The Board said it believes its action will enable the PREPA Plan to be confirmed if the court determines it is otherwise confirmable. “While the Board understands some bondholders desire to prosecute accounting claims for purported misuse of prior net revenues, if they existed, the Board believes its payment of the full value of the bondholders’ collateral moots the relevance of the accounting claims because the First Circuit ruled they can only be paid from the collateral because the bonds are non-recourse and may not file unsecured claims,” the Board said.


“In substance, the amendments will provide the distribution to the non-settling bondholders and monoline insurers shall equal the value of their interest in the Net Revenues and (b) the means by which the additional payment will be provided,” the FOMB said.


With its decision, it appears the FOMB dismissed the possibility of appealing the latest ruling to the Supreme Court.

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William Rosa
William Rosa
18 jun

In trying to visualize the interminable labyrinth of PR's economic path to destruction, I can't avoid thinking about the efficiency of the US exploiting PR. That nefarious May 12, 1898, when the US invaded PR had proved to be the biggest disaster our country had experienced, from that day on and hiding behind the so-called "manifest destiny," the US imposed a colonial regime with the purpose of extract as much wealth as possible from the country.

Today, at the end of the first quarter of the 21st century, PR is still a colony at the mercy of the US. Disheartening for the US is the fact that every attempt to "change" PR had failed miserably; they re-baptized us as Porto…

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