Bonds

PREPA bankruptcy judge orders hearing on mediation

U.S. District Judge Laura Taylor Swain ordered parties in the Puerto Rico Electric Power Authority bankruptcy to attend a hearing to address their lack of mediation sessions to reach a deal.

The hearing exclusively about mediation scheduled for Monday will be the first Swain has called in the nearly six-year long bankruptcy. She has said the lack of mediation raises the possibility she will have to dismiss the bankruptcy without an approved plan of adjustment.

In late April, Swain said the lack of consensus in the case and the great differences among the parties risked her dismissal of the case. A dismissal would lead to the bondholders attempting to get a court to appoint a receiver to run the authority and raise rates to allow for the payment of their bonds.

On Monday, the court’s mediators reported that no mediation had taken place in the preceding month and that no mediation was scheduled for May. They said on April 19 they proposed a mediation meeting to the parties but that not all parties agreed to its proposal. They said subsequent efforts to convene mediation were unsuccessful.

In response, Swain ordered attorneys for the Puerto Rico Oversight Board, Fiscal Agency and Financial Advisory Authority, and eight other bankruptcy parties including the bondholders’ group and three bond insurers, to appear at the hearing. Additionally, she ordered the board chairman and/or executive director, court mediation team leaders, and at least one business representative of the bondholder group to be present.

In late April, Swain said her mediation team reported several times in the last few months the parties had been doing little or no mediation and she repeatedly directed them to engage, including at least three times in the last month.

Last summer, talks between the Oversight Board and the bondholders broke down. In response, in late September Swain said she wanted the bankruptcy process to advance on three paths simultaneously: litigation of key issues, the creation of a multi-version proposed plan of adjustment, and continued mediation.

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