Parties in PREPA bankruptcy case to weigh in on proposal for simultaneous mediation, litigation
By The Star Staff
U.S. District Court Judge Laura Taylor Swain gave parties in the Puerto Rico Electric Power Authority’s (PREPA) bankruptcy case until Friday to provide their views on a proposal by mediators for simultaneous mediation, litigation and the creation of yet another debt adjustment plan.
Last week, the Financial Oversight and Management Board walked out of the mediation to restructure PREPA’s $9 billion debt due to “substantial disagreements with the mediation parties,” leaving the power utility without a clear resolution in its Title III bankruptcy process. On Tuesday, the judge asked the mediation team to establish a schedule to continue negotiations during litigation proposed by the oversight board, including certain claim disputes.
The team of mediators submitted certain terms and conditions for mediation that would proceed in parallel with the court’s schedule for the consideration of various litigation issues that had been stayed pending the prior conduct of the mediation.
The mediators said they believe the mediation will be greatly enhanced if the litigation schedule adopted by the court provides for the oversight board’s filing within 60 days of a new proposed plan of adjustment and related disclosure statement, which was dubbed the Toggle Plan, that contemplates alternative plan treatment depending on the outcome of the primary lien and claim disputes.
They also said the mediation will be enhanced if the litigation of the disputes takes place in the context of the oversight board’s request for confirmation of the debt plan, and a hearing on the board’s request to confirm the plan that is consistent with an expedited litigation schedule, to be held no later than June 2023.
“The Mediation Team understands that such a timetable, and the simultaneous conduct of the Mediation, will require extensive work, including, as recommended in the Proposed Amended Terms and Conditions Order, additional financial advisor assistance to the Oversight Board,” the mediators said. “However, the Mediation Team believes that focusing the Mediation Parties on a schedule for PREPA’s actual emergence as promptly as practicable from this Title III Case provides a critically important context to the Mediation.”
The mediators also said the expiration date of the mediation is December unless the mediation team seeks an extension.
PREPA has been in bankruptcy since 2017. After a prior debt deal agreement fell through, the oversight board has been attempting since April to reach a deal with creditors through a mediation process that included the Ad Hoc Group of PREPA bondholders, the monolines, the Electrical Industry and Irrigation Workers Union, PREPA’s retirement system, the Unsecured Creditors Committee and the Fuel Line Lenders.
The litigation that the oversight board is seeking will focus on whether the bondholders’ security interest securing their bond claims is limited to money PREPA deposits in accounts the bond trustee created pursuant to a 1974 trust agreement governing the issuance of the bonds.