Judge grants fiscal board more time to procure documents it says it needs for PREPA debt plan
By The Star Staff
U.S. District Court Judge Laura Taylor Swain on Wednesday granted the Financial Oversight and Management Board’s request for an extension to file Puerto Rico Electric Power Authority’s (PREPA) debt adjustment plan after a discussion over document production.
During an omnibus hearing Wednesday, oversight board lawyers said there had been a problem with the board’s production of some documents from an independent third party that were needed for mediation. The documents had been requested in order for the board to evaluate, in essence, PREPA’s ability to pay its debt.
The oversight board late Tuesday requested an extension to Friday, Dec. 16, extendable to Dec. 21, which Swain agreed to. Swain, who is overseeing Puerto Rico’s Title III and other bankruptcy cases, had told the oversight board at the last omnibus hearing that she expected a confirmable plan of adjustment by Dec. 1 but has already granted two extensions. PREPA has been in bankruptcy since 2017 to restructure some $9 billion in debt.
During the hearing it appeared that while some creditors, such as the monolines or insurers of bonded debt, wanted to negotiate a debt deal, oversight board lawyer Martin Bienenenstock, of Proskauer, said the entity wanted to litigate because its members wanted more options.
The main issue preventing a deal to settle PREPA’s $9 billion debt is a dispute over the validity of the bondholders’ debt. The litigation, the oversight board said, will focus on whether the bondholders’ security interest securing their bond claims is limited to money in PREPA accounts, or about $8.8 million, that the bond trustee had created pursuant to a trust agreement governing the issuance of the bonds.
When the lawyers for the Unsecured Creditors Committee (UCC) noted that bondholders had turned the mediation into a discussion about PREPA’s ability to pay the bondholders, Swain cut him off as she wanted the parties to focus on mediation. The UCC has taken the position that the bondholders’ debt is not valid.
Peter Friedman, the lawyer for the Fiscal Agency and Financial Advisory Authority, suggested that the government will not approve any debt deal that includes rate hikes.
In other news related to PREPA, the oversight board in a letter urged Gov. Pedro Pierluisi Urrutia not to enact legislation that would create a reserve corps for the Puerto Rico Electric Power Authority (PREPA) and LUMA Energy, the private operator of PREPA’s transmission and distribution (T&D) system.
The proposed corps would be composed of former PREPA linemen who had been transferred to other government agencies when LUMA Energy took over PREPA’s T&D operation. The oversight board said the proposed bill goes against the fiscal plan.
Meanwhile, former Cobra Acquisition President Donald Keith Ellison and former Federal Emergency Management Agency official Ahsha Tribble were sentenced each to six months in jail for their role in a corruption scheme related to the awarding of contracts to repair Puerto Rico’s electrical infrastructure following Hurricane Maria in 2017. Cobra Acquisitions has been unable to be paid a portion of the debt for repairing the island’s grid because the judge wanted to wait for a resolution in the case.