Puerto Rico bankruptcy Judge Laura Taylor Swain said she would approve a three-pronged approach to advancing the more than five-year-old Puerto Rico Electric Power Authority bankruptcy with a plan confirmation due by June 2023.
Swain said there should be litigation on two key issues, the development of a plan of adjustment with several versions, and the resumption of mediation. The three-pronged approach was similar to what the mediation team proposed last week.
Swain said the board should have a proposed plan of adjustment and disclosure statement ready by Dec. 1. She said it could include alternate proposals that depend on how the litigation turns out. She would likely order a plan confirmation hearing take place by June 2023.
Swain said she was inclined to approve an order at the PREPA public hearing on its bankruptcy held Wednesday.
Swain said a Puerto Rico Oversight Board-filed adversary proceeding on a challenge to bondholders’ alleged lien in PREPA should be restarted. She said there should be litigation on “the bondholders’ perfected security interest” in PREPA’s revenues or if “the security interest is limited to” what’s in the sinking or subordinate funds.
The other topic was “whether the bond obligations are non-recourse as to PREPA’s general assets.”
Swain said while the board and the bondholders are currently in the adversary proceeding, she would let other parties intervene to offer their comments.
She said she didn’t want to commence the so-called “current expense” adversary proceeding at this time, which would address the fuel line lenders claims. The board had advocated restarting these proceedings. The fuel-line lenders said earlier this month they were opposed to having their objections heard as part of that sort of proceeding.
In response to the bondholder group’s call to dismiss the case, Swain said she did not want to do that or to lift the stay on litigating their claims outside of the bankruptcy process, which would lead to disruption, she said.
It would be questionable to lift the stay without first examining the bondholders’ legal claims to PREPA’s money, she said.
Finally, she said mediation could be helpful. The board should appoint a lead mediator for the mediation team to deal with and always be present in negotiations.