Opponents of PREPA’s debt plan insist it is unconfirmable
By The Star Staff
Despite significant arguments to the effect that the Puerto Rico Electric Power Authority’s (PREPA) debt plan is unconfirmable, U.S. District Judge Laura Taylor Swain said Tuesday at the start of a hearing to evaluate the adequacy of PREPA’s disclosure statement that she would seek minor changes to the document.
The judge said most objections can be dealt with at the confirmation hearing for the plan set for March 2024. Her statements appear to indicate that she may dismiss most complaints to the effect that the plan is unconfirmable.
The hearing occurred following two complaints filed by opponents of the debt adjustment plan to restructure PREPA’s $9 billion debt, cutting it significantly. GoldenTree and Syncora filed a complaint against the government on Nov. 13 asserting that the commonwealth’s actions have “caused hundreds of millions of dollars in damages” to GoldenTree Syncora “by proposing and adopting fiscal plans for FY 2022 and 2023 based on inaccurate projections of how much debt PREPA can afford and using fiscal plans and budgets to compel PREPA not to credit net revenues to the accounts comprising the Sinking Fund as required by the Authority Act and the Trust Agreement.”
They also said the commonwealth failed to take action to ensure PREPA paid its debt. In another complaint, Golden Tree and bond insurer Syncora seek to annul the alleged “premium recoveries” given to certain creditors that are not entitled to such recoveries because they constitute bad-faith procurement.
Despite Swain’s remarks, opponents of the plan argue that it was illegal because payments to bondholders are based on whether they agree to settle their claims or not.
The U.S. Supreme Court has barred what it called special treatment for certain creditors in Chapter 9 bankruptcies, argued attorney Eric Brunstad, a lawyer representing the PREPA Ad Hoc Group, citing the case of Avon Parks. In that case, the Supreme Court said it was impermissible to give different holders of the same bond debt various treatments.
Thomas Lauria, a lawyer for GoldenTree Asset Management and Syncora Guarantee, said arguments in the case are not among secured and unsecured or senior and junior creditors, but rather among parties with the exact same rights.
The Financial Oversight and Management Board does not consider the fees for the bond issuance and a fee for entering into a restructuring support agreement as part of the treatment of claims, the oversight entity’s lawyer Martin Bienenstock said.