Bonds

Puerto Rico Electric Power Authority bondholders want 100% of what they are owed and the Oversight Board working on the power authority’s bankruptcy plan offers a dramatically lower repayment percentage, court filing show.

In a filing late on Friday, the bondholders said even if one assumed their claim was “unsecured,” they would still have a claim to be paid 100% of what they are owed. While the judge had asked the sides to offer their proposals to determine the size of the bondholders’ unsecured claim, the bondholders went beyond proposing procedures to say that they have multiple claims to being paid in full.

In a separate filing to the court, the board said, the currently proposed plan of adjustment that pays bondholders claims at 0.21%plan of adjustment that pays bondholders claims at 0.21% “may remain confirmable if the claim is allowable at the petition date amount or in any smaller amount.” The board said the bondholders claim should be set at the original bankruptcy petition date of July 2017.

The bondholders cite a section of the bankruptcy code that they have a claim on all unpaid principal and interest and argue the authority’s trust agreement and non-bankruptcy law also allow them to claim this.

However, if Judge Laura Taylor Swain insists that the bondholders estimate the value of the “unsecured net revenue claim,” they argue she should estimate five factors: the rates PREPA could reasonably set, the load that PREPA can expect, the amount of revenues PREPA can otherwise generate, PREPA’s future current expenses, and a discount value to set a present claim based on future available cash.

Bondholders also said she should examine certain legal issues, such as whether the bondholders’ claim is good indefinitely against PREPA.

The bondholders said Swain should value their claim at 100% or there’d be the “unjust” result that their claims, which have “powerful equitable right” in addition to contractual claims, would have less claim that unsecured creditors, who do not have the equitable rights.

The bondholders asked Swain to stay the claims estimation process as they pursued their appeal of her ruling that they lacked a perfected lien on the authority’s revenues.

The board argued that according to the Puerto Rico Oversight, Management, and Economic Stability Act, Swain should not stay her proceedings even if the appeals court grants a review of the bondholders’ appeal.

The Unsecured Creditors Committee filed a motion saying it agreed with the board on everything except for this. “As a matter of efficiency and to avoid potential inconsistent results,” the board’s schedule should not commence until the bondholders’ appeal is settled, the committee said.

The board said based on Swain’s ruling the bondholders holding was “unsecured,” the bondholder can make no claim for interest that would have been paid after the July 2017 bankruptcy filing.

The board said the written submissions for the process of determining the bondholders’ claim should be completed no later than May 25. By comparison, the bondholders asked for this process to extend to June 7. In either case, Swain would rule after those dates.

The board said it was appropriate to go through the coming bankruptcy steps in a speedy manner. The bondholders said they want plenty of time for discovery.  

The bondholders’ have asked Swain to “certify” their appeal to the appeals court. On Friday Swain gave until 5 p.m. Monday for parties to file statements of support for the bondholders, until 5 p.m. on April 17 to object to the filings, and until 5 p.m. on April 24 to reply to the objections. She said she planned to rule on the certification motion without a hearing.  

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