Puerto Rico Oversight Board seeks summary judgment on PREPA lien

The Puerto Rico Oversight Board filed a motion for summary judgment in the Puerto Rico Electric Power Authority lien adversary proceeding Monday night.

The filing follows a bondholders’ defense of the lien filed on Oct. 17. The bondholders say they are owed $8.3 billion of principal and billions more of unpaid interest. The board contends the bondholders’ lien was only applicable to money in the bonds’ sinking and self-insurance funds.

The bondholders have pointed to section 805 of the trust agreement, which they claim, says the trustee can resort to drawing on the authority’s revenue stream if the sinking fund is inadequate.

The board contends the passage the bondholders rely on refers only to money in the subordinated funds. Puerto Rico Oversight Board lawyer Martin Bienenstock said the PREPA bondholders’ lien claims should largely be rejected.

Puerto Rico Attorney John Mudd expects bankruptcy Judge Laura Taylor Swain to issue a summary judgment on some issues.

Puerto Rico Clearinghouse Principal Cate Long noted the amount of revenue bonds affected, saying, “I think the court is well aware of the importance of a ruling one way or the other.”

She expects Swain to “delay oral arguments on the motions for as long as possible and likely past the deadline she set for filing a PREPA plan of adjustment (December 1). Bondholders have argued that the lien challenge should be heard as part of the confirmation hearing (June 2023) and I’m sure the court is retaining as much flexibility as possible on the issue.”