PREPA bondholder appeals ruling denying administrative expense priority status.

By THE STAR STAFF

Monoliner National Public Finance Guarantee Corp. has filed an appeal to the U.S. Court of Appeals for the First Circuit, challenging a federal court ruling that denied Puerto Rico Electric Power Authority (PREPA) bondholders’ request for administrative expense status, one of the most important forms of priority claims in bankruptcy‑like proceedings.

In bankruptcy and in Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) Title III cases, an administrative expense claim refers to obligations that arise after the bankruptcy filing and are considered necessary to preserve or operate the debtor’s estate. These claims -- such as the cost of continuing business operations, professional fees, or certain court‑authorized payments -- are granted top‑tier priority, meaning they must be paid ahead of most other creditors, including many pre‑existing bondholders or unsecured claims.

The notice of appeal, filed this past Tuesday, seeks review of the Opinion and Order Denying PREPA Bondholders’ Motion for Allowance of Administrative Expense Claim, entered by the U.S. District Court for the District of Puerto Rico on March 16. 

In the PREPA litigation, bondholders sought to have certain alleged post‑petition obligations treated as administrative expenses. If granted, this would have elevated their repayment priority dramatically, potentially reshaping PREPA’s restructuring framework. The district court rejected that argument, prompting the appeal now being pursued by National Public Finance.

The underlying motion denied by the court in the PREPA case was advanced by a coalition of PREPA bondholders. Several major financial stakeholders joined the motion, including Assured Guaranty Inc., GoldenTree Asset Management LP, National Public Finance Guarantee Corp., the PREPA Ad Hoc Group, Syncora Guarantee Inc. and the U.S. Bank National Association, acting as PREPA bond trustee.

By appealing, National Public Finance argues that the district court erred in denying administrative expense treatment and that the bondholders are entitled to priority consideration for the obligations at issue.