By The Star Staff
U.S. District Judge Laura Taylor Swain, who is presid-ing over the Puerto Rico Electric Power Authority’s (PREPA) Title III case, has rejected a bondholder petition to delay next month’s confirmation hearing on the utility’s debt adjustment plan pending an appeals court ruling.
The bondholders have appealed Swain’s ruling that the utility’s $9 billion debt is backed only by a $2.4 billion claim and that it is unsecured. The judge said that even if the First Circuit Court of Appeals in Boston were to rule quickly on the bondholders’ challenge, the losing party would then appeal to the U.S. Supreme Court to review the decision, which would mean that a final ruling is not imminent.
“The prospect of quick, final disposition of the disputes over this court’s rulings and fundamental aspects of the oversight board’s [Financial Oversight and Management Board] plan proposal is uncertain at best, and what movants propose will likely leave the debtor, the commonwealth, and the people of Puerto Rico in a further prolonged state of uncertainty and impede progress toward renewal of the critical service infrastructure necessary to Puerto Rico’s return to the capital markets,” Swain ruled this week.
Assured Guaranty, the PREPA bond trustee, the PREPA ad hoc group, GoldenTree Asset Management, and Syncora Guarantee asked Swain to delay the confirmation hearing, scheduled to begin on March 4, until the First Circuit rules. Movants argue that, in light of oral argument before the First Circuit -- heard on Jan. 29 -- as well as the “unusual speed” with which oral argument was scheduled, the “highly expedited briefing schedule” established by the First Circuit, and “voluminous briefing” in connection with confirmation, the court should adjourn or stay the confirmation hearing pending a decision by the First Circuit.
Swain denied a similar request from the bondholders last year.
The bondholders had argued in part that Swain no longer could confirm the PREPA plan of adjustment because the appeal had “divested the court of jurisdiction concerning certain issues central to the determination of movants’ allowable claims,” according to the order. Swain rejected those arguments.
She also noted that negotiations between objecting bondholders and the oversight board faced obstacles and that mediators have said that an adjournment may not lead to meaningful negotiations.
“However, movants are parties to a cooperation agree-ment that forbids separate settlements with the oversight board,” Swain said in her order. “Indeed, a predominant theme in movants’ theory of the case, as expressed through the over three hundred pages of objections filed to date, is that bondholders subject to the trust agreement interpreted in the adversary proceeding have no individualized right to settle PREPA bond claims or any portions thereof and are, therefore, bound to the course set by the movants, which has, thus far, focused on aggressive litigation.”