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  • Writer's pictureThe San Juan Daily Star

November ends with busy week in island’s bankruptcy cases

The opening briefs have not yet been filed in the U.S. Court of Appeals for the First Circuit in Boston.

By The Star Staff

Last week was an active one in Puerto Rico’s bankruptcy cases.

On Thursday, Puerto Rico Electric Power Authority (PREPA) creditors GoldenTree Asset Management, Syncora Guarantee and Assured Guaranty filed notices that they will appeal U.S. District Court Judge Laura Taylor Swain’s ruling in the lien and recourse challenge.

The notices came after Swain filed her final ruling on Tuesday, dismissing remaining counterclaims, including that PREPA is in breach of its statutory obligations by failing to raise rates to generate revenue to cover bondholders.

Earlier this year, Swain had ruled that the $8.5 billion in outstanding PREPA bond debt was unsecured, meaning that there is no property to seize, repossess, or foreclose upon. She also ruled that the claim was only worth $2.4 billion. Under PREPA’s currently proposed adjustment plan, bondholders that haven’t already settled their debt with PREPA would receive 3.5% to 12.5% of the unsecured claim amount. PREPA is represented by the Financial Oversight and Management Board.

The opening briefs have not yet been filed in the U.S. Court of Appeals for the First Circuit in Boston.

Meanwhile, in the commonwealth bankruptcy case, Puerto Rico continued its fight to get Bonistas del Patios’ $7 million claim to pay its professionals expunged, arguing that disallowing it would advance the claims reconciliation process, according to a reply filed last Wednesday. Puerto Rico formally exited its bankruptcy in 2022 but there are still issues to be resolved.

Bonistas del Patio, a group that represents on-island bondholders, has asked that the court hold the claim in abeyance until it rules on the agreement between Bonistas and the commonwealth in which financial adviser Ducera Partners and attorney Davis Polk will receive half of the claim amount. Puerto Rico argued that maintaining the claim was unnecessary.

“While the Bonistas have unfortunately tied the Bonistas motion to the claim, the commonwealth nevertheless understands that, like other requests for payment of professional fees and expenses, the agreed-upon amount can be paid upon entry of an order approving the Bonistas motion, without the need for the claim to remain pending on the registry,” Puerto Rico argued in its motion. “Accordingly, the Bonistas motion preserves Bonistas’ right to payment of their professional fees and expenses in the agreed-upon amount, and disallowance and expungement of the claim now will advance the claims reconciliation process and narrow the remaining issues pending before the court.”

Under the terms of the February deal, Ducera Partners and Davis Polk would receive $2.5 million and $1 million, respectively. The oversight board, which initially fought the payment, dropped its objection once the payment was reduced.

Bonistas del Patio, or Backyard Bondholders, a group that represented Puerto Rico bondholders in bankruptcy negotiations, is opposing an oversight board request that would prevent the group’s advisers from getting $7 million in professional fees.

Bonistas has been seeking payment citing their contributions to helping reach an agreement that led to the COFINA debt adjustment plan and the commonwealth debt adjustment plan.

The bills from Bonistas’ professionals were not analyzed by the fee examiner as happened with the other professionals working on the island’s bankruptcy.

Puerto Rico’s Fiscal Agency and Financial Advisory Authority has sought to highlight Bonistas’ role in resolving the dispute, and did not object to payment.

Puerto Rico’s fee examiner, meanwhile, recommended in a report filed last Wednesday that $49.2 million be paid in professional compensation.

Bankruptcy professionals requested $48.2 million in fees and $1.6 million in expenses. The fee examiner recommended the approval of 98.8% of those. O’Melveny and Myers, counsel to the Puerto Rico Fiscal Agency and Financial Advisor Authority, and Citigroup Global Markets, an investment banker and financial adviser to the oversight board, made up the lion’s share of the recommended payments.

Expenses have already surpassed the $1 billion mark.

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