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  • Writer's pictureThe San Juan Daily Star

PREPA bond trustee: Proposed receiver should benefit all bondholders

U.S. District Judge Laura Taylor Swain

By The Star Staff

Puerto Rico Electric Power Authority’s (PREPA) bond trustee argued as an intervenor in an appeal to the U.S. First Circuit Court that if the court approves a bondholders’ request to appoint a receiver, the relief should benefit all creditors and not just the ones that brought the suit.

U.S. Bank National Association in its capacity as trustee under PREPA’s Trust Agreement dated Jan. 1, 1974 submitted a brief last week as intervenor to address certain issues in an appeal brought up by GoldenTree Asset Management and Syncora Guarantee.

U.S. Bank National Association said that nothing in the trust agreement barred GoldenTree Asset Management and Syncora Guarantee’s motion to lift a stay so that they can appoint a receiver to PREPA.

However, U.S. Bank argued, if the First Circuit Court of Appeals agrees that bondholders have the right to appoint the receiver, all bondholders should have the same rights related to the receiver.

“If this court grants [GoldenTree and Syncora] relief, then the trustee asks that such relief extend to both it and to all bondholders,” the brief said. “The trust agreement requires that bondholder actions taken to enforce rights under the trust agreement must be conducted for the benefit of the trust and all bondholders.”

GoldenTree and Syncora filed a motion to appoint a receiver on Aug. 24, a day before PREPA filed its debt adjustment plan. The new plan had the support of holders of about $2.4 billion in debt. Right now, bondholders are divided into factions supporting and opposing the plan.

Even though GoldenTree and Syncora were parties to a separate process to appoint a receiver, they made new arguments about equal protection in a new motion. U.S. District Judge Laura Taylor Swain denied the motion.

Swain had ruled March 22 that bondholders’ $8.4 billion in debt was unsecured and later that the unsecured claim was only $2.4 billion.

If GoldenTree and Syncora win, they should have no special rights, the bond trustee argued.

In a case related to Puerto Rico’s bankruptcy, the Public Finance Corporation (PFC) bondholders will now be able to receive $47.7 million in bonds, after an Oct. 3 order from Swain allowing the correction of technical problems that prevented the debt issuance.

The Financial Oversight and Management Board on Sept. 22 asked Swain to delay closing the Puerto Rico PFC Title VI restructuring because of an unnamed technical problem issuing the debt.

The Puerto Rico Fiscal Agency and Financial Advisory Authority had said it could not issue the debt because the order required bonds to be issued with the same CUSIP numbers as outstanding debt, which the bond indenture prohibits.

Swain changed the order so that new CUSIPs could be issued for the PFC debt.

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