U.S. lawmakers clash over PREPA agreement

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U.S. lawmakers have squared off along party lines over the proposed restructuring of more than $8 billion of Puerto Rico Electric Power Authority bonds.

On Oct. 30 U.S. Reps. Raúl Grijalva, D-Ariz.; Nydia Velázquez, D-N.Y.; and Darren Soto, D-Florida, filed an amici curiae (friends of the court) brief in the PREPA bankruptcy. They asked the judge to reject the already negotiated and widely-agreed upon PREPA Restructuring Support Agreement, which spells out the bankruptcy terms.

On Tuesday U.S. Reps. Rob Bishop, R-Utah; Don Young, R-Alaska, Jody Hice, R-Ga.; Aumua Amata Radewagen, R-Samoa; and Bruce Westerman, R-Ark., sent a letter to the Democrats asking them to withdraw the amici curiae.

The effort to restructure PREPA's debt dates back to July 2014, when the utility was forced to draw on its debt service reserve, foreshadowing the territory's descent into the biggest municipal bankruptcy.

Under the pending RSA, bondholders would exchange outstanding PREPA debt for two new classes of bonds. Tranche A, which is expected to mature in 40 years, would be exchanged at 67.5 cents on the dollar of existing bonds. A second group of Tranche B “growth” bonds, which would be tied to the economic recovery of Puerto Rico and mature in 45 years, would be exchanged for 10 cents on the dollar of existing bonds.

The Democratic representatives said that the agreement would impose too high a cost on PREPA’s ratepayers, would be a burden on PREPA, and contravenes the Puerto Rico Energy and Public Policy Act.

“In an effort to depoliticize the process” of addressing Puerto Rico’s financial crisis, the Puerto Rico Oversight, Management, and Economic Stability Act “established the Oversight Board as an independent overseer to manage debt restructuring.”

“Unfortunately, your recent request to file an amicus brief in a lawsuit objecting to the RSA threatens to not only derail the financial restructuring and thereby delay the rebuilding of the grid, it sends a clear message to the parties that there is no point in attempting to constructively resolve differences as even negotiated settlements will not be immune from politically-driven tampering by Congress,” the Republicans wrote.

“The result will be years of costly litigation and prolonged economic stagnation for the people of Puerto Rico,” they said.

In other PREPA legal news, on Oct. 31 the Unsecured Creditors Committee filed an objection to PREPA’s motion for approval of the RSA. The committee made an array of legal arguments against the agreement.

On Nov. 1 Puerto Rico bankruptcy Judge Laura Taylor Swain filed an order with deadlines for the case. She has scheduled a hearing on the motion to approve the RSA on Jan. 19.

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