PREPA bondholders insist on putting utility in receivership
By The Star Staff
Puerto Rico Electric Power Authority (PREPA) bondholders GoldenTree Asset Management and insurer Syncora Guarantee argued to the U.S. First Circuit Court of Appeals in Boston this week that a stay over their litigation to pursue a receiver for PREPA was lifted by operation of a statute.
GoldenTree and Syncora argued that U.S. District Judge Laura Taylor Swain’s refusal to hold a hearing within 30 days on their Aug. 24 motion to appoint a receiver resulted in the stay automatically expiring. The judge has refused to lift the stay to allow the bondholders to seek a receiver for PREPA.
“Appellants are not asking this Court to weigh the merits of the Lift Stay Motion, but rather seek recognition that the stay is now lifted by operation of statute. Section 362(e)(1) provides that the stay is automatically lifted 30 days after the filing of the Lift Stay Motion unless the Court, after notice and a hearing, orders the continuation of the stay,” the bondholders said in an Oct. 24 brief.
Golden Tree and Syncora seek to put PREPA under a receiver which, under commonwealth law, would take control of PREPA and possess its assets.
“There is no dispute that the district court failed to hold the required hearing, and instead entered an order indefinitely continuing the automatic stay,” the bondholders said. “The district court’s Order does precisely what Congress forbids.”
Swain has opposed holding a hearing because GoldenTree and Syncora were parties to an earlier lawsuit that sought to appoint a receiver to the authority and had agreed to a stay.
While the judge has said the creditors have filed a duplicative adversary proceeding, GoldenTree and Syncora argued that their lawsuit seeking a receiver for PREPA is different from the prior case because circumstances have changed due to court rulings that have allowed PREPA to continue to divert billions of dollars of revenues instead of depositing them in a sinking fund that serves as collateral to the bondholders.
The First Circuit Court of Appeals intends to hold a hearing on the receivership issue on Dec. 4.
Meanwhile, PREPA’s governing board this week approved a settlement with insurers to collect $286.3 million in claims for damages caused by Hurricane Maria.
The agreement was approved at the board’s monthly meeting, which took place Wednesday.
That amount represents 95.42% of the insurance policy coverage cap.
The agreement, which still requires Financial Oversight and Management Board and Title III court approval, is “very favorable” and avoids potential litigation that would entail additional expenses, said the chairman of the governing board, Francisco Berríos.
PREPA, however, broke off negotiations with its insurance firm seeking payment for damages to the electrical grid caused by the January 2020 earthquakes as the utility did not agree with a proposed offer from Mapfre.