PREPA Bondholders Face Setback in Debt Recovery
After carefully reviewing the expert reports and testimonials, Judge Laura Taylor Swain, presiding over the bankruptcy case of PREPA, has determined that the bondholders’ claim is worth $2,388 million. This amount is significantly lower than the debt the bondholders have been seeking to recover, which they believed they could obtain by appointing a trustee to manage PREPA.
Parallel Events Lead to Amendments in Debt Adjustment Plan
Last Friday, the Fiscal Oversight Board (JSF) released a new fiscal plan for PREPA, proposing a repayment of approximately $2.5 billion to bondholders. This announcement, along with Judge Swain’s decision, will likely result in amendments to the Debt Adjustment Plan (PAD) to determine the final repayment amount. The bondholders, who initially claimed $8,477 million, now face the reality of a significantly reduced claim.
Challenges Faced by Bondholders and Potential Implications
The bondholders’ position has been gradually unraveling since March, when Judge Swain ruled that their debt is not guaranteed by all of PREPA’s income, but only by specific funds within the corporation’s budget. In her recent decision, the judge acknowledged the difficulties a trustee would face in collecting the debt, considering Puerto Rico’s laws, the requirement for fair and reasonable energy rates, and the potential intervention of constitutional powers once the debt is out of the bankruptcy process.
Judge’s Ruling and Implications for Bondholders
Judge Swain adopted the methodology proposed by the Fiscal Oversight Board’s expert and highlighted the challenges a trustee would encounter. She emphasized that the bondholders’ projections lacked consideration for contingencies that could prevent debt collection and questioned their hypothesis that a receiver could revolutionize PREPA’s operations. The judge also clarified that Puerto Rico law would apply in the appointment of a trustee, and the Energy Bureau would retain its authority over rate increases and charges.
Appeals and Future Actions
The bondholders have not been granted the right to appeal Judge Swain’s previous decision, but they may seek a review from the Court of Appeals regarding the debt adjustment and the decision that does not guarantee their full debt. The final outcome remains uncertain as the bondholders navigate the legal process.
About the Author
John Doe is a journalist and lawyer with 25 years of experience. He has been involved in the founding of several prominent media outlets, including NotiCel, the Center for Investigative Journalism, Red 96, Primera Hora, and El Nuevo Día Interactivo.
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A setback in their efforts to recover their debt from PREPA. Judge Laura Taylor Swain has determined that the bondholders’ claim is worth $2,388 million, significantly lower than their initial claim. This decision comes in the midst of parallel events, including the release of a new fiscal plan by the Fiscal Oversight Board proposing a repayment of approximately $2.5 billion to bondholders. As a result, amendments will likely be made to the Debt Adjustment Plan to determine the final repayment amount. The bondholders will now have to reassess their expectations and potentially adjust their recovery strategy.
How might the release of the new fiscal plan by the Fiscal Oversight Board affect the amendments that will be made to the Debt Adjustment Plan for the repayment of bondholders
The release of the new fiscal plan by the Fiscal Oversight Board can potentially have an impact on the amendments made to the Debt Adjustment Plan for the repayment of bondholders. Here are a few ways in which it could affect the amendments:
1. Repayment Priorities: The new fiscal plan may outline the government’s revised priorities for debt repayment. This could influence the amendments made to the Debt Adjustment Plan by prioritizing certain bondholders over others or proposing changes in the repayment terms.
2. Payment Capacity: The fiscal plan might provide a clearer picture of the government’s financial capacity and its ability to generate revenue. Based on this, the Debt Adjustment Plan could be modified to adjust the repayment amounts or timelines for bondholders.
3. Negotiation Strategy: The release of the new fiscal plan could impact the negotiating stance of the government and the Fiscal Oversight Board. If the plan shows improvements in the overall fiscal situation, they may take a more lenient or stricter approach in negotiating the amendments with bondholders.
4. Oversight Board Recommendations: The Fiscal Oversight Board’s recommendations in the new fiscal plan may influence the amendments to the Debt Adjustment Plan. If the plan includes specific suggestions or guidance on debt restructuring, the amendments may align with those recommendations.
5. Investor Sentiment: The release of the fiscal plan may impact investor sentiment towards the government’s ability to meet its debt obligations. This could affect bondholder negotiations and potentially lead to more favorable or unfavorable amendments to the Debt Adjustment Plan.
Overall, the release of the new fiscal plan by the Fiscal Oversight Board will likely provide a framework and direction for the amendments that will be made to the Debt Adjustment Plan, shaping the repayment terms and conditions for bondholders.