Public Statement of Certain PREPA Bondholders
Comment on the Recent Black-Out on the Island: After eight years of Oversight Board control and nearly a half billion in advisor fees, PREPA continues to have problems and cannot deliver electricity on a reliable basis. Puerto Rico cannot afford for the Oversight Board to continue wasting time and money on frivolous litigation; instead, the Board must work to fix PREPA. If the Oversight Board isn’t part of the fix, it is part of the problem.
NEW YORK–(BUSINESS WIRE)–Certain bondholders of the Puerto Rico Electric Power Authority (“PREPA”), including, Assured Guaranty Inc., GoldenTree Asset Management LP, National Public Finance Guarantee Corporation, the PREPA Ad Hoc Group and Syncora Guarantee, Inc., today issued the following statement:
The recent island-wide power outage, which left the people in Puerto Rico without electricity during Holy Week, was devastating for residents. The outage showed yet again the complete failure of the Financial Oversight and Management Board (the “Oversight Board”) to manage PREPA effectively to deliver reliable and affordable power to Puerto Rico’s people.
The people of Puerto Rico deserve better. They deserve a power grid that works, with reasonable and affordable rates. The Oversight Board has had nearly a decade to fix PREPA, yet the frequency of blackouts and service interruptions has continued to worsen. Meanwhile, under the Oversight Board’s supervision, PREPA has failed to access most of the billions in aid the federal government has made available to bring PREPA’s electric grid up to mainland U.S. standards. This is because while PREPA sits in bankruptcy, it cannot access the public markets to raise the funds needed to restore and repair its power grid so that it can then obtain reimbursement from federal funds. The Oversight Board’s decision to keep PREPA in bankruptcy is therefore a significant contributing factor to the increase in blackouts.
Instead of completing the bankruptcy process so that PREPA can raise the funds needed to repair the grid, the Oversight Board has needlessly extended the case by making and then breaking numerous settlements with bondholders, and by choosing to waste years taking increasingly frivolous legal positions, including two rehearing petitions after a federal court of appeals declared that bondholders have a properly perfected lien on PREPA’s net revenues and have a claim for the full $8.2 billion they lent PREPA plus accrued interest. Implausibly, after losing repeatedly at the federal appellate court, the Oversight Board is now pivoting to the new position that PREPA has no net revenues, contradicting years of PREPA’s own financial reports and the Oversight Board’s own prior fiscal plans. This litigious approach needlessly prolongs PREPA’s bankruptcy, further delays repair of the grid, saddles Puerto Rico’s citizens with massive fees paid to the Oversight Board’s numerous consultants and advisors, and most unfortunately, leaves the people of Puerto Rico in the dark.
As part of this litigation strategy, the Oversight Board has attempted to blame PREPA’s bondholders for PREPA’s current state of affairs. But the bondholders provided billions in financing for PREPA’s electric grid, and have not received a penny from PREPA in nearly a decade. None of PREPA’s rate increases since its bankruptcy case began in 2017 have been used to repay its debt.
If the Oversight Board genuinely shares the bondholders’ goal of fixing PREPA, it should seek a reasonable agreement that enables PREPA to promptly emerge from bankruptcy as a credit-worthy utility with proper financing, allows PREPA to provide power at reasonable rates, puts federal dollars to work, and focuses on effective management of the system for Puerto Rico’s residents. The PREPA bondholders have made proposals to the Oversight Board that would achieve these objectives, including one made six months ago, which would have provided an additional $2.5 billion in funding from the bondholders to immediately begin fixing and upgrading Puerto Rico’s electric grid. Despite the Oversight Board’s rejection of the bondholders’ most recent offer (as has happened with all of the bondholders’ proposals to end PREPA’s bankruptcy), it remains on the table. The Oversight Board should engage in good faith to end PREPA’s bankruptcy on consensual terms. It’s what Puerto Rico’s people deserve.
Contacts
Longacre Square Partners
Joe Germani / Ashley Areopagita
PREPA@longacresquare.com
