Judge gives gov’t until May 2 to submit new PREPA debt plan or other options
By The Star Staff
U.S. District Court Judge Laura Taylor Swain, who is overseeing Puerto Rico’s bankruptcy cases, has given the government until May 2 to submit a new plan of adjustment for the Puerto Rico Electric Power Authority (PREPA) or provide other options.
The ruling was made Tuesday, the same day Gov. Pedro Pierluisi Urrutia canceled the restructuring support agreement (RSA) for PREPA reached in 2019, which reduced PREPA’s $9 billion debt by about 30%, contending that it was not feasible and would result in higher rates.
It was the second time an RSA for PREPA has been canceled. In June 2017, the Financial Oversight and Management Board declined to certify a prior RSA negotiated by the firm Alix Partners, causing the utility to file for bankruptcy under the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA.
Swain directed the oversight board and the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) to file a joint status report regarding their progress by March 18. Then by May 2, the board should file one of several options. The first is a proposed plan of adjustment, disclosure statement, and proposed related deadlines; or a detailed term sheet for a plan of adjustment, with a proposed timetable for the filing of the plan, consideration and approval of a disclosure statement, voting and confirmation of the plan; or a proposed schedule for the litigation of disputed issues in PREPA’s Title III case, including the motion for stay relief to seek appointment of a receiver, the unsecured creditors committee (UCC)’s claim objection and issues raised in adversary proceedings; or a memorandum of law showing cause as to why the court should not consider dismissal of PREPA’s Title III bankruptcy case for failure to demonstrate that a confirmable plan of adjustment can be formulated and filed within a time period consistent with the best interests of PREPA, interested parties, and the people of Puerto Rico.
The judge also on Tuesday denied a request from the Ad Hoc Group of PREPA bondholders to appoint a mediator to negotiate a plan of adjustment that did not require legislative approval. Swain said that to the extent that it sought an order requiring the oversight board to participate in, and PREPA to provide unlimited financing for, mediation focused on a particular subset of creditors under an RSA that was terminated, she would deny it.
However, the judge acknowledged the need for prompt engagement in any actions necessary to bring PREPA’s Title III case to a speedy, appropriate conclusion. Until recently, the oversight board and the government entities’ words and actions gave the court reason to expect that a plan of adjustment would be forthcoming promptly, but Swain said the RSA termination announcement risks a major setback in progress toward readjustment of PREPA’s liabilities. To that end, the judge said she was willing to evaluate a consensual private mediation proposal.
To ensure meaningful progress toward an end to the bankruptcy, Swain ordered the oversight to meet and confer with AAFAF, the ad hoc bondholder group, and all other major stakeholders and interested parties whose collaboration is necessary to construct a viable basis for a plan, to consider whether a consensual mediation arrangement can be entered into promptly to resolve key plan-related issues.