PREPA Bondholders Demand Resolution Amid Continued Bankruptcy

PREPA Bondholders Address Ongoing Bankruptcy Challenges

The bondholders of the Puerto Rico Electric Power Authority ("PREPA"), a consortium that includes GoldenTree Asset Management, LP, Assured Guaranty Inc., and National Public Finance Guarantee Corporation, have voiced strong concerns regarding the continued bankruptcy proceedings of PREPA. They begin their statement by asserting the importance of the recent judicial decisions upholding the bondholders' rights and highlight the implications of these rulings for Puerto Rico.

Judicial Confirmation and Its Significance

The First Circuit Court reaffirmed its earlier ruling regarding PREPA’s revenue bonds, confirming that these financial instruments are backed by a legally valid lien on PREPA's revenues. This verdict is seen as a resounding victory for the bondholders. However, instead of engaging in constructive dialogue following this judicial victory, the Financial Oversight and Management Board appears to be opting for a continuation of litigation.

The Bondholders' Commitment to a Fair Solution

The PREPA bondholders have presented a constructive proposal aimed at navigating the troubled waters of PREPA's bankruptcy. Their focus is on establishing terms that would not only respect the bondholders' rights but also facilitate a reliable energy supply for the people of Puerto Rico.

Addressing Past Failures and Looking Forward

In their statement, the bondholders reflect on previous settlement attempts, which they claim could have already led to a resolution of the bankruptcy that has persisted for seven years. The bondholders emphasize that instead of moving forward, the Board’s strategies have resulted in further delays and increased costs that are ultimately borne by the Puerto Rican populace.

Financial Ramifications of Continued Litigation

The ongoing legal battles have resulted in significant financial burdens for PREPA, including excessive advisor fees that have amassed to over $400 million. The bondholders argue that if the Board had prioritized a logical resolution, these funds could have been utilized to service new bonds, providing much-needed capital for infrastructure improvements.

Consequences of Inaction

With nearly a decade lost since the Board took control in 2017, major opportunities for improvement in energy service have been wasted. The PREPA infrastructure remains in dire condition, and the pressing need for a robust power system continues to loom large for the citizens of Puerto Rico.

Proposed Terms to Resolve the Bankruptcy

The bondholders propose a way forward that includes the issuance of new, long-term bonds to enhance PREPA’s financial stability. They outline five key points to resolve the bankruptcy proceedings swiftly and equitably.

The Five-Pillar Proposal

The proposal entails accepting replacement bonds with low default risk and is based on currently relevant financial projections. The bondholders plan to accept a new funding structure that provides for vital capital investments while maintaining electricity costs at levels deemed fair by the Board. Through this financial approach, the bondholders hope to address the essential repairs required for PREPA’s operations.

The Importance of Consensus for Puerto Rico’s Future

The bondholders urge that the continued obstinacy of the Board in traversing this financial landscape could jeopardize the future of PREPA and the welfare of the Puerto Rican community. They question the Board's commitment to acting in good faith when it comes to supporting reliable electricity solutions for the island's inhabitants.

A Call for Action

As stakeholders in PREPA's future, the bondholders are adamant about the necessity of moving toward a settlement that duly recognizes both the creditors' rights and the pressing needs of the citizens of Puerto Rico. They reiterate that the ongoing bankruptcy cannot be the status quo; rather, it demands urgent reform and clarity.

Frequently Asked Questions

What is the main concern of PREPA bondholders?

The bondholders are concerned about the prolonged bankruptcy proceedings and the lack of good faith negotiations to resolve the situation effectively.

How have past settlements affected PREPA?

Previous settlements could have helped streamline PREPA's financial recovery, but the Board's failure to engage has led to missed opportunities.

What are the financial implications of the ongoing litigation?

The legal battles have accrued over $400 million in advisor fees, straining PREPA's resources and preventing vital infrastructure improvements.

What do the bondholders propose to resolve the situation?

The bondholders propose a settlement that includes replacement bonds with low default risk and new funding to repair and enhance PREPA's facilities.

Why is timely resolution essential for Puerto Rico?

A timely resolution is crucial for ensuring a reliable power supply, essential for both residents and businesses in Puerto Rico, and to avoid further financial waste.

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