Judge keeps PREPA court freeze in place, says key accounting fight must finish first.

U.S. District Judge Laura Taylor Swain

By THE STAR STAFF

U.S. District Judge Laura Taylor Swain ruled Wednesday that Puerto Rico Electric Power Authority (PREPA) bondholders will have to keep waiting before they can push ahead with their lawsuits.

The judge said the court will not lift the long‑running freeze on litigation until it finishes a major accounting case that will determine how much money PREPA actually had -- and has -- available to pay bondholders.

The ruling came after a two‑hour hearing and keeps in place a stay that has been in effect for nine years. Swain said the accounting case needs to be resolved first because it deals with the same core questions the bondholders are raising in their attempts to dismiss the case or install a receiver to run the utility.

Swain said the accounting case will give bondholders the chance to argue the issues they care about, but in the right order and with a full factual record.

The accounting counterclaim is now the focus of the PREPA bankruptcy. Over the next six months, the court will examine whether PREPA ever generated “net revenues” -- the money that would secure the bondholders’ claims -- and whether any such revenues exist today.

Those findings will directly affect how much bondholders can recover. They also overlap with the arguments bondholders are making in their push to take control of PREPA through a court‑appointed receiver.

Bondholders themselves have acknowledged that the accounting case covers many of the same issues they want to raise in their motions.

During the hearing, bondholder attorneys argued that the stay has dragged on for years and is preventing them from defending their rights. They warned that, at the current pace, their claims might not be heard until 2027 or later.

They also said the long delay violates basic fairness and due‑process principles.

Swain disagreed. She pointed to earlier rulings from the First Circuit Court of Appeals, which held that bondholders had already waived their right to a faster hearing by failing to challenge the stay when it was first imposed. She also noted that the law they cite applies only in certain types of cases -- and it’s not clear their request for a receiver qualifies.

The judge added that even the bondholders’ own proposed schedule would not have produced a hearing anytime soon.

Lawyers for the Financial Oversight and Management Board, the Unsecured Creditors Committee, and PREPA’s fuel line lenders argued that bondholders are overstating the harm they claim to be suffering.

Peter Friedman, representing the Puerto Rico Fiscal Agency and Financial Advisory Authority, said bondholders were misreading a recent Puerto Rico Energy Bureau order. He said the order does not support the idea that PREPA -- or a receiver -- could raise rates or borrow money freely.

He warned that a receiver would face the same legal limits as PREPA and would likely trigger “an enormous amount of litigation.”

Assured Guaranty attorney Miguel Estrada countered that the stay has now lasted nine years and that the court’s approach is preventing bondholders from protecting what they say is their collateral.