An increasing number of creditors are pushing back against a plan to cut the debt load of Puerto Rico’s bankrupt power utility by 75%, with investors and insurers accounting for $3.6 billion of the bonds set to vote against the proposal, a lawyer warned Wednesday.
(Bloomberg) — An increasing number of creditors are pushing back against a plan to cut the debt load of Puerto Rico’s bankrupt power utility by 75%, with investors and insurers accounting for $3.6 billion of the bonds set to vote against the proposal, a lawyer warned Wednesday.
Investors holding approximately $1.8 billion of Puerto Rico Electric Power Authority debt plan to join GoldenTree Asset Management, Syncora Guarantee and Assured Guaranty in opposing the restructuring plan submitted Friday to the court by a federally appointed financial oversight board, Thomas Lauria, a lawyer representing GoldenTree, said Wednesday during a court hearing before US District Court Judge Laura Taylor Swain.
Prepa, as the utility’s called, is seeking to restructure $8.3 billion after years of mismanagement and economic decline. The amount of bonds in opposition could increase to about 50% of the utility’s debt, Lauria said.
“They intend to vote against the plan,” Lauria told Swain.
That $3.6 billion against the debt-cutting plan surpasses the creditor pool that’s in favor of it. That includes an ad hoc group of bondholders led by BlackRock Financial Management along with National Public Finance Guarantee. Swain plans to hold a confirmation hearing on that plan in March, she said Wednesday.
The more resistance to Prepa’s debt plan, the more likely it will face appeals even if Swain confirms the restructuring. That would drag out the six-year bankruptcy that took a back seat to the commonwealth’s own debt restructuring. Cutting Prepa’s debt has proved more difficult than Puerto Rico’s bankruptcy, where island officials and creditors forged consensual agreements that erased tens of billions of debt.
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Two major rulings by Swain favor the power utility. In March she determined that bondholders only have a secure claim to accounts holding $16 million and in June she capped their right to Prepa’s net revenue at $2.38 billion, a slice of the $8.3 billion the utility owes.
GoldenTree, Syncora and Invesco Advisers intend to appeal those rulings, the firms wrote in a court document filed Tuesday. GoldenTree and Syncora on Monday filed a notice that they would appeal Swain’s decision on Friday denying the firms’ request to lift a stay on appointing a receiver.
Bondholders on Wednesday failed to gain an abundance of outward sympathy from Swain. She once again declined to delay Prepa’s confirmation schedule until any appeals were resolved and thanked Lauria for his information but had no further comment or quesions about the potential growing opposition.
When Mark Ellenberg, a lawyer representing Assured Guaranty, said the insurer’s attempts to join debt negotiations were rebuffed, Swain quickly chimed in.
“Tomorrow’s another day,” Swain told the attorney.
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