Puerto Rico Prepa bondholders object to disclosure statement

By Sarah Lizee

Olympia, Wash., Feb. 6 – The Commonwealth of Puerto Rico’s disclosure statement for its electric power authority (Prepa) drew an objection Friday from an informal group of bondholders, according to documents filed with the U.S. District Court for the District of Puerto Rico.

The bondholders said the plan of adjustment for Prepa is “patently unconfirmable and does not represent a serious attempt to legally restructure Prepa’s obligations.”

The plan would limit creditors’ total recovery, on the nearly $15 billion that Prepa owes, to around $5.4 billion. Most of that is payable over three to five decades.

“The oversight board maintains that it would be unaffordable and unsustainable for Prepa to repay its creditors even a penny more than that sum,” the informal group said in its objection.

“But the same day the oversight board filed its plan and disclosure statement, it publicly released its own recent proposal for Prepa to repay its creditors approximately $7.8 billion.”

The group noted that as recently as February 2022, the board told the court that it continued to stand by a 2019 restructuring support agreement that was premised on Prepa’s ability to pay just bondholders alone more than $8 billion in recovery on their bonds.

“The oversight board’s plan and disclosure statement do not try to explain how billions of dollars of concededly affordable and sustainable creditor recoveries could have simply vanished in just a few days and months,” the group said.

The bondholders said the plan and disclosure statement serve as a “pressure tactic” and attempt to convince less knowledgeable creditors to take a “lowball settlement offer.”

Bond trustee U.S. Bank NA and bondholders Assured Guaranty Corp. and Assured Guaranty Municipal Corp. also filed objections to the disclosure statement.

The disclosure statement hearing is scheduled for Feb. 28.

The Commonwealth of Puerto Rico announced its Title III petition filing in the U.S. District Court for the District of Puerto Rico on May 3, 2017. The case number is 17-03283.

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