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  • Writer's pictureThe San Juan Daily Star

Settlement reached to create new PREPA Ad Hoc Group to litigate in bankruptcy

U.S. District Judge Laura Taylor Swain

By The Star Staff

Certain Puerto Rico Electric Power Authority (PREPA) creditors and the Financial Oversight and Management Board have reached a settlement to allow a new PREPA bondholder group to intervene in a recourse challenge related to the amount of the bonded debt.

The new PREPA Ad Hoc Group of bondholders will not be allowed to relitigate any issues already decided. The group also will not be able to take a position inconsistent with positions already taken by various defendants, including the indenture trustee.

“For the avoidance of doubt, without violating the foregoing, may proceed on appeal in accordance with applicable rules of appellate procedure regarding briefing and other aspects of the appeal,” according to an Oct. 13 stipulation.

The new PREPA ad hoc group including Assured Guaranty, GoldenTree Asset Management and bond insurer Syncora Guarantee was formed to pursue litigation after original members decided to accept a new PREPA debt deal. The new bondholder group was formed when the prior ad hoc group of PREPA bondholders dissolved after several members -- including Blackrock Financial Management, Nuveen Asset Management, Franklin Advisers, Taconic Capital Advisors, and Whitebox -- formed the Majority Member PREPA Ad Hoc Group.

U.S. District Judge Laura Taylor Swain ruled in March that bondholders’ $8.4 billion bonded debt only had an unsecured claim, and later ruled that the unsecured claim was only $2.4 billion.

Bondholders have indicated that they plan to appeal the ruling once it is finalized. Swain still has to rule on a challenge involving the security of a trio of funds that contain a minimal amount of money.

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