Mujica does not foresee end of PREPA bankruptcy this year.

Financial Oversight and Management Board Executive Director Robert Mujica

By THE STAR STAFF

Financial Oversight and Management Board Executive Director Robert Mujica believes it is unlikely that a settlement can be reached regarding the Puerto Rico Electric Power Authority’s (PREPA) bankruptcy before the end of 2026. 

Mujica said the fact that some bondholders insist on continuing their legal actions seeking the full recovery of their investment hinders an immediate solution to the public corporation’s bankruptcy.

“We are currently pursuing both paths. Mediation is ongoing, and there is still a path to resolution. Litigation is also ongoing. Recent decisions have accelerated certain determinations, allowing us to move forward with litigation. A result can be achieved on either path,” the oversight board official said. “Obviously, if an agreement is reached through mediation, it will be faster if there is an agreement on the amount. On the litigation side, realistically, that will take longer. We are talking about at least six months, and that is why we are not in favor of litigation. There is always a risk, and that risk cannot be eliminated. We are constantly evaluating that risk. I hope the bondholders are doing the same regarding whether we can reach an understanding. Assessing that risk, along with what we understand could be paid, is something we haven’t gotten to yet. Now, if those lines are crossed with what the bondholders are willing to accept … but the risk cannot be ignored. As I said, we constantly have to evaluate it. We’ll try to move forward as best we can.”

Recently, a federal magistrate judge issued a mixed ruling, partly granting PREPA bondholders’ renewed request for more discovery and setting a tight schedule for the next phase of the litigation over the utility’s bond claims.

That decision follows the court’s earlier decision to partially lift the litigation stay, allowing the bondholders’ long-standing accounting counterclaim to proceed. It also permitted limited discovery on how PREPA’s revenues and expenses should be calculated under federal bankruptcy law and the bond trust agreement.

On May 12, U.S. Magistrate Judge Judith Gail Dein ruled on the bondholders’ motion to compel, allowing some types of documents and testimony but rejecting others.

The court denied the bondholders’ request for PREPA’s monthly operating reports from before 2014 and related materials, but said it might reconsider if the oversight board’s discovery on affirmative defenses makes the information relevant. The judge also turned down requests for documents supporting PREPA’s 2012 and 2013 bond offering statements, but left the door open for the bondholders to ask again if needed.

Judge Dein also declined to order the production of documents explaining the differences between PREPA’s monthly operating reports and the oversight board’s net revenue calculations. Instead, she allowed the bondholders to submit one interrogatory asking the board to describe the main differences in accounting methods. The order states that giving this explanation will not waive privilege or limit expert testimony.

However, the court ordered the oversight board, which represents PREPA in bankruptcy, to provide documents showing PREPA’s requests for, receipt of, and use of federal funds from 2016 until LUMA Energy and Genera took over operations of the transmission & distribution system and legacy power plants, respectively. The judge denied the bondholders’ request for documents about alleged efforts to delay or divert federal funds. She also told the oversight board to produce any post-petition annual budgets prepared under Section 504 of the Trust Agreement, or confirm if none exist.

In an important procedural move, the court allowed the oversight board to seek limited discovery from the bondholders. This includes five interrogatories and two depositions related to its affirmative defenses. The judge also denied the board’s request to file an interim summary judgment motion.

The order sets a tight discovery schedule. Initial disclosures and written discovery were due Tuesday, and deposition notices by May 26. All fact discovery must be finished by July 17. Expert disclosures start July 20, with opening reports due July 30 and rebuttal reports in September. Cross-motions for summary judgment are due Sept. 25, with responses and replies continuing into early November. Oral arguments may take place at the November omnibus hearing.