PREPA bondholders ask greater payment capacity evidence to be heard
3 min read
Bondholders opposed to the proposed Puerto Rico Electric Power Authority plan of adjustment asked the bankruptcy judge to hear new evidence the authority will have a greater than anticipated ability to pay off its debt.
The bondholders submitted their “urgent motion” to U.S. District Court Judge Laura Taylor Swain Monday evening. They are calling for Swain to “reopen the record” of the confirmation hearing and to “grant a supplemental hearing on the issue of the extent of PREPA’s future revenues from the sale of electricity.”
The bondholders say recent projections from LUMA Energy, which handles electric transmission and distribution on the island, show greater use in the coming years and indicate the authority would be able to pay 58% more bond debt in coming years.
An attorney for the opposing bondholders on Saturday sent an email to the Puerto Rico Oversight Board’s chief bankruptcy attorney, Martin Bienenstock, asking the board to reopen the record and hold a supplemental hearing. On the same day Bienenstock responded with an email rejecting these and the bondholders’ request that Swain “suspend the court’s consideration of confirmation.”
The opposing bondholders making the request are Assured Guaranty Corp., Assured Guaranty Municipal Corp., PREPA bond trustee U.S. Trust, the PREPA Ad Hoc Group, GoldenTree Asset Management, and Syncora Guarantee.
“They have a very valid point but I doubt judge Swain will allow it,” said Puerto Rico attorney John Mudd.
On April 1 LUMA presented revised forecasts for electric demand to the Puerto Rico Energy Board, the bondholders told Swain in their urgent motion. Using the board’s own methods for calculating future available revenues, the new load forecast would lead to an increase in revenues available to pay bondholders to $4.1 billion from $2.6 billion.
The bondholders learned of the increased forecast on April 17.
The revised forecasts are “important and probative,” the bondholders said.
“When LUMA previously revised its load forecasts downward in connection with the 2023 [PREPA] fiscal plan, the Oversight Board withdrew the then-pending plan [of adjustment] to incorporate the new projections and started the plan confirmation process anew,” the bondholders told Swain. “Having set that precedent, the Oversight Board can hardly complain that any short delay to supplement the record with LUMA’s most current projections would somehow be unfairly prejudicial.”
“Denying this motion would be highly prejudicial to the [the opposing bond parties] because it would deprive them of the opportunity to introduce newly discovered evidence that further undermines the projections and testimony elicited by the Oversight Board in support of the plan and at the confirmation hearing.”
On Tuesday afternoon the board told The Bond Buyer, “The Oversight Board stands by the comprehensive research and data projecting revenue and expenses which informed the PREPA plan of adjustment and was subject to detailed review by the creditors and the U.S. District Court during the recent confirmation hearings. The Oversight Board sees no logic in the dissenting bondholders’ request to consider preliminary new data concerning electricity generation but not operating and capital expenses.”
As of Tuesday afternoon neither Swain nor any other PREPA party had responded in the bankruptcy to the bondholders’ motion.
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Meanwhile, the future of the case also depends on how the U.S.
The proposed plan of adjustment groups PREPA bondholders into different groups and treats the bonds differently. It offers bondholders who haven’t reached a settlement with the board a cash recovery of 4.3% of the original par value.
