By The Star Staff
The holders of the lion’s share of the $8.26 billion in Puerto Rico Electric Power Authority (PREPA) bonds, filed on Thursday a memorandum of law opposing the advisory fees that McKinsey & Company intend to charge to the Financial Oversight and Management Board.
The oversight board has spent $2 billion already in professional and legal fees for all of the bankruptcy processes, including the commonwealth’s.
GoldenTree Asset Management LP, Assured Guaranty Inc., Syncora Guarantee Inc., National Public Finance Guarantee Corp. and the PREPA Ad Hoc Group, which are holders and insurers of some 61% of the approximately $8.26 billion principal amount of outstanding bonds, want an extension of the time to object to McKinsey & Company Puerto Rico Consulting Inc. fees.
PREPA has incurred over $400 million just in professional fees during the nearly eight years its bankruptcy case has been pending.
“And yet, almost nothing constructive or of value to PREPA and its stakeholders has been achieved,” the PREPA bondholders said. “A consensual resolution is nowhere in sight, PREPA’s electricity generating, transmission and distribution system is less reliable than it was on the petition date, PREPA does not have access to the capital markets all utilities require to maintain and upgrade their operations, and the people of Puerto Rico continue to suffer.”
McKinsey & Company Puerto Rico Consulting Inc. seeks an interim allowance of $3.7 million for fees purportedly incurred from Jan. 1, 2024 through June 30, 2024.
By all indications, the bondholders said, the oversight board “seems content to extend that state of affairs as it pursues its myopic quest to avoid repaying the Revenue Bonds that funded the construction and maintenance of the Island’s power system.”
“It would rather continue picking fights with the holders of the Revenue Bonds -- fights that, if history is any teacher, will take years to resolve and with outcomes that will reveal that the Oversight Board’s positions are baseless -- than work constructively with the Bondholders to promptly end this case and put PREPA on a path to recovery,” the bondholders added.
The bondholders asserted that the oversight board will continue to generate adviser fees that improperly drain and waste PREPA’s funds, funds that could and should be put to better use.
“The Bondholders reserve their right to challenge the propriety of such fees,” they said. “By this motion, the Bondholders seek an order protecting their right to object.”
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