The San Juan Daily Star
Judge denies fuel line lenders’ request to review PREPA-Vitol settlement
By The Star Staff
U.S. Magistrate Judge Judith Dein denied a request from Puerto Rico Electric Power Authority (PREPA) fuel line lenders Wednesday to examine the power utility’s court settlement with Vitol, a firm that has agreed to help push a debt adjustment plan for bankrupt PREPA.
Dein, who assists U.S. District Court Judge Laura Taylor Swain with the island’s bankruptcy cases, denied the request after the Financial Oversight and Management Board made the settlement with Vitol public as part of its objection to the fuel line lenders’ request.
The fuel line lenders earlier this month said they learned for the first time on Nov. 2 that Vitol had settled its litigation with PREPA for about $45 million and that the company would be put in its own class to try to push through PREPA’s debt adjustment plan. PREPA has been in bankruptcy since 2017 but the bankruptcy court has insisted on having a debt adjustment plan by Dec. 1.
Under the Puerto Rico Oversight, Management and Economic Stability Act, a debt adjustment plan containing more than one impaired class with one class accepting, or no impaired accepting class in a single-class plan, can be confirmed under section 1129(b) without the acceptance of other classes.
Lawyers for the oversight board stated that Vitol had agreed to accept 50% of the ultimate recovery percentage for the general unsecured claims class. Vitol will be placed in its own class, which will receive such separate treatment, and Vitol will vote in favor of the plan, creating an impaired accepting class.
Given the importance of the oversight board’s responsibility to file a plan on Dec. 1 with a realistic prospect of confirmation, the fuel line lenders said they believe that information about the actual terms of the agreement between the board and Vitol, including the circumstances under which Vitol’s commitment to vote in favor of the plan arose, must be made available promptly.
The U.S. Bank National Association, as trustee under the trust agreement for the PREPA bonds, Assured Guaranty Corp. and Assured Guaranty Municipal Corp., the Ad Hoc Group of PREPA Bondholders, National Public Finance Guarantee Corp. and Syncora Guarantee Inc. asked to join the urgent motion of PREPA’s fuel line lenders seeking to examine the Vitol settlement agreement.
However, the oversight board made the settlement public.
“As the Fuel Line Lenders acknowledge in the reply, the substance of the information sought by the document requests (to which the PREPA Bondholders and the Trustee joined) has now been voluntarily produced by the Oversight Board through the public filing of the Vitol Settlement Agreement,” Dein said.
The magistrate judge also said that at present, good cause does not exist for further examination of the oversight board regarding the Vitol settlement agreement.
In September, the Title III bankruptcy court entered an order that sought to resolve PREPA’s bankruptcy case after mediation talks collapsed. First, the court established a litigation schedule for a lien challenge to PREPA’s bonded debt. Second, the court ordered mediation of certain issues and third, the court ordered the oversight board to file by Dec. 1 a proposed plan of adjustment it believes could be confirmed.