Group of PREPA bondholders threatens to pull out of restructuring plan if it is not approved by October

By The Star Staff

Whitebox Advisors LLA group of Puerto Rico Electric Power Authority (PREPA) bondholders have told the judge overseeing their bankruptcy that they will pull out of a three-year-old deal to support the utility’s proposed restructuring plan if it is not confirmed by October.

On Oct. 18, 2023, a group of PREPA bondholders and insurers entered into a Cooperation Agreement to settle their debt with PREPA. The agreement has been extended at least four times since then as the public utility remains in dispute with another group of bondholders who refused to enter into a debt agreement.

On Monday, bondholders represented by the law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, and who called themselves the Paul, Weiss Ad Hoc Group, agreed to terminate their participation as a “Supporting Bond Party” under the Plan Support and Settlement Agreement by Oct. 1, unless the plan is approved.

The Paul, Weiss Ad Hoc Group comprises BlackRock Financial Management Inc., Franklin Advisers Inc., Hudson Bay Capital Management Inc., Nuveen Asset Management LLC, Taconic Capital Advisors L.P., and Whitebox Advisors LLC.

The cooperation agreement, which includes other bondholder groups, united nearly 90% of the bondholders but another group of bondholders who oppose the debt deal noted that the action “further illustrates that the [Financial Oversight and Management] Board’s previous cramdown plan and “divide and conquer” strategy is no longer viable, and that proceeding with the litigation before a new Board is constituted would be counterproductive and potentially unnecessary.”

The oversight board, which has lost six of seven members, said it would rather wait until it is reconstituted before proceeding with a new PREPA debt deal.