Unsecured creditors seek end to stay in PREPA Title III case
By The Star Staff
Puerto Rico’s Unsecured Creditors Committee (UCC) insisted Thursday that the Title III bankruptcy court should drop the stay against the Puerto Rico Electric Power Authority (PREPA) so it can prosecute its objection to PREPA bondholders’ claims.
The move comes a day after the Financial Oversight and Management Board for Puerto Rico said in a status report to the Title III bankruptcy court that it will move forward with the restructuring support agreement (RSA) for PREPA, which calls for a 4.6 cent charge to pay bondholders.
PREPA has been in bankruptcy under Title III of the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, to restructure over $9 billion in debt.
The UCC says the oversight board does not mention setting a timeline in the report; rather, it simply asks to submit another status report in March, with no commitment to do anything between now and then. The RSA has been paralyzed since 2019.
Just like before, the UCC says, the oversight board wants more time to figure out its path forward while it uses the stay to preclude the UCC from exercising its statutory rights.
The oversight board said the terms of the RSA require certain legislation, including legislation to establish the securitization structure of the proposed new bonds, the 4.6 cent transition charge needed to support the prospective debt service, and certain protections against the diminution of transition charge revenues caused by reduced demand for energy provided by PREPA.
“Whether the Puerto Rico Legislature will support the RSA remains an open question. The Oversight Board has discussed the legislation needed to implement the RSA with certain legislative leaders, who indicated they will be in a position to evaluate it in February. A prior version of this legislation was previously discussed with the RSA Parties. Advancing PREPA’s plan of adjustment is therefore a primary focus, and the Oversight Board continues efforts to propose a plan of adjustment for PREPA by the end of March 2022,” the oversight board said. “This date, however, is dependent on certain factors outside the Government Parties’ control that might push the filing of a plan into the second quarter of 2022.”
In the event that necessary legislation is not enacted to implement the RSA, the government will evaluate alternatives without new legislation. As reported by the STAR, in December the PREPA governing board approved resolutions to separate legacy generation, real estate and hydroelectric assets into separate subsidiaries as required by the Operation and Maintenance Agreement with LUMA Energy LLC. The creation of the new subsidiaries, PREPA Genco LLC, PREPA Property Co LLC, and PREPA HydroCo LLC, remains subject to approval by the Puerto Rico Energy Bureau.
Attorney Rolando Emmanuelli insisted the RSA is a bad idea because, for one thing, PREPA bondholders, who were unsecured creditors, were turned into secured creditors who will get over 60% of their investment back. Unsecured creditors generally get what is left over in bankruptcy cases.