PREPA’s stakeholders only spent 45 hours in mediation

U.S. District Judge Laura Taylor Swain

By The Star Staff

A resolution of the Puerto Rico Electric Power Authority’s (PREPA) $9 billion bankruptcy is moving slowly.

The lead mediator, retired judge Shelley Chapman, certified in a motion this week that during June she and another colleague, Jamie Eisen, devoted only 45 hours to mediation.

On April 8, 2022, the federal Title III Court overseeing the bankruptcy case entered two orders initiating mediation in the case, one to appoint a mediation team, and the other to establish the terms and conditions of the proposed mediation, which was intended to facilitate confidential settlement negotiations of all issues and proceedings arising in PREPA’s Title III case.

U.S. District Judge Laura Taylor Swain, who is overseeing PREPA’s bankruptcy case, scheduled oral arguments for July 23 on the PREPA bondholders’ pursuit of a $3.7 billion administrative expense claim.

The claim arises from PREPA’s alleged failure to pay bondholders net revenues since the bankruptcy proceedings began in 2017. The Financial Oversight and Management Board, which represents PREPA, has argued that the money was spent maintaining PREPA’s electrical system, and therefore wasn’t net revenue.

Swain gave the parties up to 90 minutes for oral arguments.

The bondholders’ assert that their claim does not impact PREPA’s assets, that uninsured disaster repair costs should have been funded by PREPA’s self-insurance fund, and that PREPA’s post-petition collateral use equates to the extension of post-petition credit.

They also claim that they plan to use monthly operating reports to show that PREPA earned $3.7 billion in net revenue over the almost eight-year bankruptcy. They say PREPA should not exit bankruptcy without paying them the claim in full or negotiating an agreement, but the oversight board said PREPA did not make sufficient revenues, and that bondholders must be paid with future net revenues.