PREPA administrative expense litigation restarted

U.S. District Judge Laura Taylor Swain restarted litigation of the Puerto Rico Electric Power Authority bondholders’ $3.7 billion administrative expense claim Wednesday. 

Work on the claim has been paused since August, when President Trump dismissed five and then a sixth member of the seven-member Puerto Rico Oversight Board. 

Swain told parties they should create a schedule for discovery on the administrative expense topic: what should be sought and produced. 

A joint status report on discovery schedules and content proposals is due by Nov. 24. 

At Wednesday’s Puerto Rico omnibus hearing, attorneys for the board, the PREPA Ad Hoc Bondholder Group, Puerto Rico’s Fiscal Agency and Financial Advisory Authority, and the Unsecured Creditors Committee said they were in favor of restarting discovery discussions.

Attorney Thomas Lauria, representing GoldenTree Asset Management, said given the uncertainty about the composition of the board and the importance of this issue, GoldenTree preferred delaying action until the December omnibus hearing as long as its rights would be reserved.

The money from the $3.7 billion administrative expense claim would be used primarily to compensate bondholders for the freeze on payments since the 2017 start of the PREPA bankruptcy. It would not impact the more than $8 billion in principal the bondholders say they are owed.

G. Eric Brunstad Jr., attorney for the PREPA Ad Hoc Bondholder Group, told Swain that in the last few months the group of investment houses led by BlackRock shifted alliance and now oppose the board’s proposed bond restructuring deal. He said holders of 92% of PREPA’s bonds formally indicated their opposition to the proposed deal.