Bondholders of the Puerto Rico Electric Power Authority are seeking court-ordered mediation and tight deadlines for action on the authority’s debt restructuring.
The Ad Hoc Group of PREPA Bondholders filed a motion for these things and another motion for expedited consideration of their motion Friday afternoon in the U.S. District Court for Puerto Rico, which is handling the PREPA bankruptcy.
The Puerto Rico Oversight Board reached a Restructuring Support Agreement with the Ad Hoc Group nearly three years ago that specifies the general terms of a bond restructuring. However, the board has repeatedly asked the court for delays in advancing the deal toward a Plan of Adjustment, which the court has granted.
In Friday’s motion the bondholders asked for a mediator, saying “the primary issue to be mediated is discrete — Plan B, an alternative path forward on the RSA if the required legislation is not passed, an issue that has been in the Oversight Board’s hands for months.”
“It should be possible for the limited number of mediation parties to work through the details of a Plan B proposal in a matter of weeks with appropriate oversight and direction from a skilled mediator,” they said. Subsequently, the mediator can work with all creditors to create a Plan of Adjustment.
The deal would require local legislative approval of certain legislation — to establish the securitization structure of the proposed new bonds, the transition charges needed to support the prospective debt service, and certain protections against the diminution of transition charge revenues caused by reduced demand for energy provided by PREPA. ln recent weeks, there has been increasing signs the legislature would not approve them because many legislators think the deal is too generous to bondholders.
Board member Justin Peterson said he had seen the bondholders request for mediation. “I think that’s a very good thing. Mediation is how we got the GO deal done… I think it will be critical to getting the PREPA deal done.”
He said he was speaking for himself and not for the board.
“I think this board wants to finish the job of restructuring,” Peterson said.
The bondholders suggested that Judge Laura Taylor Swain bring back Barbara Houser, who served as the central government bond deal mediator, to become the PREPA mediator. Swain dismissed Houser and her team in January after they told her their job was done.
The bondholders also said board Executive Director Natalie Jaresko’s intention to leave her position on April 1 makes it more important to get to work immediately, as it will take time for her replacement to get up to speed in the bond negotiations. They asked Swain to consider their requests on an expedited basis.
The bondholders asked Swain to impose an April 15 deadline to file a proposed PREPA Plan of Adjustment, a June 15 deadline for the judge to consider the disclosure statement, an Oct. 15 deadline for the court to confirm the plan, and a Nov. 30 deadline for enactment of the plan.