UCC may again ask court to terminate PREPA bankruptcy process

By The Star Staff

The Unsecured Creditors Committee (UCC) in Puerto Rico’s bankruptcy cases may for a second time ask the U.S. District Court to terminate the bankruptcy process for the Puerto Rico Electric Power Authority (PREPA).

The UCC says it is pondering filing a request for termination of PREPA’s bankruptcy after April 21.

On Aug. 18, 2020, the UCC filed a request asking the district court to terminate the Bankruptcy Rule 9019 motion for PREPA on the grounds that the district court lacked subject matter jurisdiction under the twin doctrines of mootness and ripeness because the federal Financial Oversight and Management Board and PREPA have no intention of moving forward with a proposed deal to settle PREPA’s $9 billion debt with creditors.

In the alternative, the UCC asked the district court to end the Bankruptcy Rule 9019 motion, which calls for a compromise or settlement, so as to allow the UCC to pursue its objection to the PREPA bond claims.

On Sept. 25, 2020, the oversight board opposed the UCC’s motion to terminate the Bankruptcy Rule 9019 Motion, requested that the district court continue to adjourn the hearing on that motion, and offered to provide an updated status report on its position on or before Dec. 9, 2020.

On Nov. 4, 2020, the district court entered an order denying the UCC’s motion to terminate the Bankruptcy Rule 9019 Motion.

The district court’s order provided that the UCC may not renew its request to terminate the Bankruptcy Rule 9019 Motion until after April 21, 2021. The UCC is determining whether to appeal the district court’s order denying its motion to the court to terminate the Bankruptcy Rule 9019 Motion.

Currently, there is no mood in the Puerto Rico Legislature to approve a debt settlement for PREPA that would entail a hike in rates, as does the one proposed.

PREPA has been in bankruptcy since 2017.

Under a debt deal proposed last year, bondholders would exchange their PREPA bonds for new series of bonds: presumably “Tranche A” bonds at 67.5 cents on the dollar, and new “Tranche B” bonds at 10 cents on the dollar. Payment of the Tranche B bonds would depend on full payment of the Tranche A bonds and on future electricity sales on the island. The new bonds would be paid off through an additional charge imposed upon commonwealth power consumers, beginning at about 1 cent per kilowatt-hour (kWh), increasing to 2.768 cents per kWh and then to 4.552 cents per kWh for the expected 40-year terms of the new bonds.

Political leaders including then-Gov. Wanda Vázquez Garced and then-Senate President Thomas Rivera Schatz at the time opposed the deal.

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