By The Star Staff
Several Puerto Rico Electric Power Authority (PREPA) bondholders have lost an adversary proceeding that claimed PREPA was seeking support for its debt adjustment plan by “buying votes.”
GoldenTree Asset Management and Syncora Guarantee sued in November alleging that the Financial Oversight and Management Board, which represents PREPA, had given several groups, including National Public Finance Guarantee Corp., PREPA’s fuel line lenders and the BlackRock Financial Management group, advantageous debt settlements so that they would vote in favor of PREPA’s plan of adjustment.
The oversight board had argued that the action was designed to obstruct confirmation at all costs, not on the merits but rather based on litigation overload. The plaintiffs are creditors who allegedly own or insure some $886 million in PREPA bonds.
U.S. District Judge Laura Taylor Swain, who is overseeing PREPA’s Title III restructuring, on Jan. 3 did not rule on the issue but said the dispute would be part of the confirmation hearing slated for March and didn’t merit an adversary proceeding.
She said robust litigation schedules already exist to ensure that all parties in interest to PREPA’s Title III case can raise objections to the plan, including objections to any alleged bad faith procurement of votes in support of the plan, she said.
“Accordingly, the Court finds that engaging in expedited litigation that would be duplicative of issues before the Court at the Confirmation Hearing in two months is not a beneficial use of the parties’ resources or in the interests of judicial economy,” the judge said. “For the foregoing reasons, the Court stays the Adversary Proceeding pending resolution of the request for confirmation of the Plan, without prejudice to the Plaintiffs’ ability to raise the issues presented in their Complaint in their objections to confirmation of the proposed Plan.”