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  • Writer's pictureThe San Juan Daily Star

In disclosure statement filing, PREPA offers higher payout to early RSA adopters


The Puerto Rico Electric Power Authority (PREPA) has filed its disclosure statement for its third amended plan of adjustment, offering early adopters of the restructuring support agreement (RSA) a higher payout.

Settling bondholders would receive 44.4% of their $2.4 billion in unsecured net revenue claims under the plan, according to PREPA’s motion for an order approving the disclosure statement, which was filed last week.

The change would cost the authority $1.1 billion, and be 12.4% of the $8.5 billion master bond claim. The first two thirds of bondholders will receive a pro rata share of a $210 million RSA fee.

“The oversight board respectfully submits that the supplemental disclosure statement, together with the disclosure statement, provides adequate information for a hypothetical investor to make an informed decision on the modified third amended plan, and that it should be approved along with the other relief requested herein,” the motion said.

PREPA filed its plan of adjustment on Aug. 25. The plan had the support of a coalition of bondholders that included BlackRock Financial Management, Nuveen Asset Management, Franklin Advisers, Taconic Capital Advisors, and Whitebox Advisors.

A forward bond purchase agreement published recently shows the power utility agreed to pay about $124.4 million to buyers of $1.6 billion in new debt.

BlackRock Financial Management, Whitebox, Taconic, Franklin and Nuveen agreed to buy $1.6 billion in debt from PREPA as part of the bankruptcy settlement, which still requires court approval.

The execution of the purchase agreement was authorized by the resolution adopted by the Financial Oversight and Management Board on Aug. 18 authorizing execution of a plan support agreement, forward delivery bond purchase agreement, and filing of the third amended plan of adjustment.

The $124.4 million pays for the forward delivery bond commitment fee and the exit financing structuring fee, the document notes. The amount of the bonds sold may be reduced by up to $37.5 million if bonds are required to be taken to first settlement bondholders.

PREPA’S plan of adjustment is opposed by holders of over half of its outstanding bonded debt, including GoldenTree Asset Management, Invesco and bond insurers Syncora and Assured Guaranty in motions submitted to the court in August.

In their motion, Invesco, Syncora and Golden Tree said the debt plan was unconfirmable as it provides disparate treatment to creditors whose rights are similar, if not identical. They said the plan, which would cut bondholders’ debt by 80% to $2.5 billion, improperly classifies various identical claims separately to gerrymander accepting classes, thus violating the Bankruptcy Code.

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