Puerto Rico Oversight Board gets support in PREPA case

The Puerto Rico Oversight Board received some support in its battle over discovery with Puerto Rico Electric Power Authority bondholders, but the court has yet to weigh in.

Puerto Rico’s Fiscal Agency and Financial Advisory Authority filed a joinder Thursday, supporting the board’s position on discovery. “There will be a time and place to bring discovery disputes before the court if the disclosure statement is approved and the plan moves forward, because a coordinated schedule and parameters around discovery will be set,” FAFAA said.

Discovery for a disclosure statement and discovery for a plan of adjustment are quite different, the board said in a filing Tuesday. It does not make sense to start the latter before the judge has approved a disclosure statement.

In the board’s Tuesday response to an Ad Hoc Group of PREPA Bondholders motion in the bankruptcy, the board said the court will hear its motion to “establish global confirmation discovery procedures” on Tuesday.

The motion, the board said, is “aimed at creating and maintaining an orderly process for all stakeholders — not just movants — to evaluate materials in connection with the plan that is currently on file.”

The bondholders’ requests are “exceedingly broad,” the board said, and they are seeking “patently irrelevant and/or privileged material.”

In late January the Ad Hoc Group of PREPA Bondholders, with the consent of bond insurers Assured Guaranty and Syncora Guarantee, requested documents and the scheduling of depositions from the board.

“Fact and expert discovery in this complex case cannot plausibly be completed by mid-April if it doesn’t even start until sometime in March,” the group told the bankruptcy court last week.

The bondholder group said discovery must be completed by mid-April for parties to argue their positions in a July plan of adjustment hearing. U.S. District Court Judge Laura Taylor Swain wants to confirm a plan of adjustment in July.

The board finally responded to the document request, but called it premature.

The bondholder group said the information the board made available in an online “data room” is “insufficient.”

Discovery around a motion to approve a proposed 2019 PREPA bond deal took more than seven months, so allotting less than two months is not a realistic time frame, the bondholder group argued.

“There is, unfortunately, every reason to believe that the Oversight Board will leverage an exceedingly truncated discovery schedule to run out the clock,” the group said in its filing.

Swain has not responded to the filings.

The board and the bondholders have been arguing over the adequacy of the proposed disclosure statement, confirmability of the plan, and the classes the different creditor groups have been placed for voting purposes.